• Service: Tax, Indirect Tax
  • Type: Regulatory update
  • Date: 30/05/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Lisa Smith

Lisa Smith
Director, Tax

+61 8 8236 3117

Indexation of Fuel Excise: what will it really cost businesses? 

by Lisa Smith, Indirect Tax Specialist

As I cycled to work, converting calories into the fuel and energy required to propel my chosen form of transport, I pondered, what’s going to be the real impact the Budget announcements to re-introduce indexation of fuel excise? Sure, there will be the direct hit every time I feed my personal thirsty 4 wheeled beast at the pump, but what about the cost to businesses?

If passed, these measures will mean that the fuel excise rate will be subject to potential increases on 1 August and 1 February every year. While this clearly results in higher costs to taxpayers who can’t claim a Fuel Tax Credit (FTC), as an entity’s FTC entitlement is linked to the amount of fuel excise payable, arguably this change alone will not increase the actual cost to businesses entitled to claim a FTC.


But what are the ‘hidden’ costs of a change that, at least on the surface, seems like a relatively 'simple change’? Adding biannual rate changes to the already myriad of regular and proposed rates changes, such as the road user charge and the proposed, but yet to be legislated, abolition of carbon pricing - all of which may happen on different dates, and the change is anything but simple. Over lay this with the existing challenge of identifying and apportioning different rates to different activities and add a dose of potential business activity statement (BAS) reporting complexities, particularly for quarterly reporting taxpayers, and you have a complex and a potential costly compliance burden.


Increased cost and complexity will mean increased scrutiny from both businesses - focused on keeping costs down while maximising claims, and the Australian Taxation Office (ATO) – focused on ensuring businesses are not over claiming and can appropriately substantiate claims.


Concerned? Need Help? Contact your local KPMG indirect tax contact for further assistance.


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