Money
Issue No. 31 - October/November 2006
Chance to cut fuel costs
by John Rawson
A new Fuel Tax Credit system quietly took effect from 1 July — so quietly in fact, that the ATO has started to conduct research to determine the level of awareness and understanding of the new system among tax agents.
Given the long transition period for many of the changes that have been made, I will not be surprised if the ATO find that awareness is low.
The new Fuel Tax Credit (FTC) system replaced the previous Energy Grants Credits (EGC) scheme subject to a number of transitional rules. These transitional rules have been put in place to gradually introduce additional activities that will be eligible for FTC. Given the current environment of high fuel costs perhaps the transition period is too long.
It will not be until 1 July 2012 that FTCs will be claimable for all business use of fuel apart from some minor exceptions — on-road light vehicles, vehicles that do not meet environmental criteria and aircraft. This is a full six years after the introduction of the FTC system.
From 1 July 2006, as a result of the change over from EGC to FTC, a number of activities that were not previously eligible for FTC have been made eligible with more to follow from 1 July 2008. Significant changes that take effect from 1 July 2006 include:
•a FTC for all fuel, including petrol, used for business related (and domestic use) electricity generation
•the previous restrictions for activities of vehicles greater than 4.5 tonnes have been removed so that all road transport activities for these vehicles are claimable. For example, trips from inside a metropolitan area to another point inside that metropolitan area are now eligible activities under the new FTC system
•FTCs are not limited to diesel vehicles. As a result petrol use is also eligible for a FTC for vehicles over 4.5 tonnes.
In addition to these changes, there have also been changes to encourage environmentally friendly practices effective from 1 July 2006.
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