• Service: Tax, Indirect Tax
  • Industry: Transport & Logistics
  • Type: Business and industry issue, Regulatory update
  • Date: 18/07/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Lisa Smith

Lisa Smith
Director, Tax

+61 8 8236 3117

Fuel Tax Credits – refund opportunities and apportionment issues 

by Lisa Smith, Indirect Tax Specialist

The Australian Taxation Office’s (ATO) broad acceptance of the Administrative Appeals Tribunal decision in Linfox Australia Pty Ltd v Commissioner of Taxation [2012] AATA 517, has resulted in potential refunds for any taxpayer operating heavy vehicles with ‘auxiliary functions’.

While the Linfox case held that fuel used in refrigeration units of heavy vehicle used on public roads was not for travelling on a public road, and therefore the ‘road user charge’ did not apply, the ATO has accepted that this principle can apply more broadly to any auxiliary function in a heavy vehicle that can be used on public roads (refer FTR 2008/1).


However, just because a heavy on-road vehicle has an auxiliary function does not necessarily mean a taxpayer is entitled to a full refund of any road user charge paid in error. Before claiming any refund it is first necessary to identify the correct applicable rate. 


To do this one must determine whether the auxiliary function is still for use on a public road (eg refrigerated trucks or concrete truck agitators), or whether the road use has ceased and an off-road use has started (eg, bore drilling rig, or, as in the ATO’s view ‘brushes down’ time of a street sweeper’).


Historically, the on-road and off-road Fuel Tax Credits (FTC) rate has differed, and the introduction of the carbon pricing effect has only increased the number of alternative rates that may be applicable to a single vehicle. This not only increases the difficulty in identifying the ‘correct’ rate, but often results in complexities in apportioning use between such rates. 


While the ATO has provided some guidance in the recently updated practice statement PS LA 2010/3, each case needs to be assessed on its own factual circumstances. Any refund claims must be supported by reasonable apportionment methodologies (where required) and appropriate substantiation.


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