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Australia: Fuel tax credit; decision of Full Federal Court

Australia: Fuel tax credit; Full Federal Court decision

The Full Federal Court issued its decision in a case exploring certain aspects of interpretation of the fuel tax credit provisions in addition to the entitlement to fuel tax credits for tax periods older than four years.

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Public roads

The first issue was whether the road user charge (applied by virtue of subsection 43-10(3) of the Fuel Tax Act 2006) applied to fuel acquired by the taxpayer for use in vehicles that had travelled on certain toll roads. At issue was whether a toll road, maintained and operated by a private operator for the purpose of making a profit, qualified as a “public road” within the meaning of subsection 43-10(3). The statute did not define what is a public road, and the court held for the Commissioner that toll roads qualified as “public roads” because the concept of a public road was focussed on the public’s capacity or entitlement to use the road, rather than on whether the road was maintained by government or privately (as may be the case for toll roads).

Credits for periods older than four years

The second issue related to the entitlement to fuel tax credits for tax periods older than four years—an issue that potentially affects the administration of the indirect tax system in Australia more generally.

To understand this point, consider how the fuel tax credit regime generally operates:

  • A taxpayer’s total fuel tax credits are ascertained by determining entitlement to the credit and working out the amount of those credits in accordance with Division 43. Subsection 43-5(1) provides that the amount of a taxpayer’s fuel tax credit is the amount of fuel tax payable on the taxable fuel, and subsection 43-10(3) provides that that amount is reduced by the amount of the road-user charge for the fuel. The taxpayer’s net fuel amount reflects how much the taxpayer or the Commissioner must pay, depending on whether the net fuel amount is positive or negative. The net fuel amount is for a tax period or a fuel tax return period.

  • The filing of the business activity statement (BAS) is deemed an “assessment” of the net fuel amount.

  • Importantly, subsection 47-5 operates to cease any entitlement to a fuel tax credit to the extent it has not been taken into account in an assessment of a net fuel amount four years after the day on which a return for either the tax period or fuel tax return period, to which the credit relates, fell due.

Here, the taxpayer had claimed credits in its BASs that did not include amounts referable to the road-user charge (as the applicant had proceeded on the basis that subsection 43-10 had reduced its entitlement to those credits).  However, if the court had found in the taxpayer’s favour and thereby reversed the application of the road-user charge, the taxpayer would have been able to claim additional fuel tax credits and therefore reduce its net fuel amount.

The question arose as to whether the limitation period of four years in subsection 47-5 operated to deny the taxpayer a right to claim additional credits.  The answer to this question turned on whether it could be said that the additional credits in dispute had been taken into account in an assessment of a net fuel amount.   

The Commissioner’s primary submission was that a fuel tax credit is taken into account in an assessment of the net fuel amount only to the extent that the particular amount of credit is quantified, as a positive integer, in the assessment. In the circumstances of the taxpayer in this case, the actual fuel tax credits sought by the taxpayer were not positively identified or claimed in its original BAS. Therefore, the additional credits sought in the proceedings were not taken into account for the purposes of subsection 47-5 and could not be claimed, even if the taxpayer were successful with regard to the road-user charge issue.

The Full Court did not accept the Commissioner’s position. Rather, it found that subsection 47-5 is broad enough to encompass all credits that are included in the calculation process of determining the taxpayer’s net fuel amount. Accordingly, despite the fuel tax credits being originally reduced through application of the road-user charge by the taxpayer, they were held as having been taken into account for the purposes of subsection 47-5 with the effect that the four-year limitation period would not have precluded the entitlement to the additional fuel tax credits (if the taxpayer had been successful on the substantive credit issue).


Read an August 2019 report prepared by the KPMG member firm in Australia

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