Maximise Fuel Tax Credits and Reduce Fuel Costs for competitive advantage
It will come as absolutely no surprise that the cost of fuel is skyrocketing. It doesn’t matter where you are; fuel prices have been hitting new records everywhere. It’s not uncommon for the price of diesel at the pump to be up 70%, and sometimes much more, compared with just a couple of years ago.
Fuels, and especially diesel fuel, are already one of the largest costs industrial and agricultural businesses need to carry. Additional fuel cost is putting the squeeze on everyone, but it also represents an opportunity for smart businesses to outperform.
It has never been more important or valuable for a business to control and accurately account for diesel and other fuels.
Any organisation that consumes a significant amount of fuel during day to day operations should ask the following questions:
- Are we receiving all the fuel we pay for?
- Are we maintaining fuel storage and transfer infrastructure to minimise waste from leakage and degradation?
- Are we controlling fuel access to ensure every gallon or litre is used to the benefit of the business?
- Are we analysing work performed vs. fuel consumption at a machine level to reduce fuel spend and optimise asset deployment?
- Are we able to report exactly where all fuels are used to minimise the fuel tax we pay?
Any one of these subjects can contribute significantly to the profitability of an operation, but together, the positive value keeps stacking up. Effective fuel management systems and fuel usage tracking helps the most profitable industrial businesses to outperform everybody else.
What is Fuel Tax Excise?
Fuel excise is the tax applied by governments to the wholesale cost of manufactured or imported fuels. It may be applied at federal or state level or both, and in general, the amount of tax paid on fuel ranges between 25% and 70%, depending on which country you operate in.
The good news is that governments around the world often allow companies to avoid some of the fuel tax, especially if that fuel is for off-highway business use. Organisations need to control, measure, and effectively report upon fuel usage to maximise their fuel tax credit / benefits.
How does the process of delivering Fuel Tax Credit to businesses work in different countries?
United States
In the USA, the Internal Revenue Service specifies that controls are applied prior to the distribution of diesel fuel to customers. The fuel importer or distributor applies the tax. If tax-free diesel is to be sold for off-highway business use, farming, or other purposes determined to be nontaxable, then it must be dyed in accordance with IRS regulations. If undyed diesel needs to be used for nontaxable purposes, there is also the facility for businesses to claim back the tax on a regular basis.
Fines for inappropriately using dyed diesel apply to businesses as well as employees. Penalties are USD 10 for every gallon inappropriately used, which means that mistakes can very quickly add up to a lot of money.
A decent fuel management system will automatically control which vehicles access dyed (tax-free) diesel, ensuring that mistakes cannot be made, fines will not occur, and that machines allowed to run on dyed diesel do so. It can save a fortune.
Click here to learn more about dyed diesel fuel requirements in the USA.
South Africa
The South Africa Revenue Service administers the Diesel Refund System (SARS Diesel Rebate), which benefits farming, forestry, mining and other businesses. In South Africa, eligible businesses may claim a refund of 40% of the general fuel levy (currently R 1.48 per litre) for up to 80% of qualifying diesel consumption. To make a regular claim under the diesel refund scheme, “a vendor must recalculate total non-eligible and eligible litres to determine the correct litres to be entered on the VAT 201 return”.
Effective vehicle fuel monitoring and fuel reconciliation reporting helps companies maximise the refund based on audit-ready data.
Click here for more information about South Africa’s diesel refund system.
Australia
The Australian Tax Office (ATO) allows for part of the fuel excise to be claimed back by businesses operating machinery, plant, heavy vehicles, etc. The ATO fuel rebate is higher for fuel that is not consumed on public roads. On 1st February 2023 fuel tax rebates for offroad diesel use was set at 47.7 cents per litre.
With fuel tax credit rates in Australia being re-calculated twice a year, robust fuel monitoring software that tracks dispensing to the asset which actually consumed the fuel is imperative for businesses that wish to maximise their ATO fuel credits.
Click here to learn more about eligibility for fuel tax credits in Australia.
How to minimise risk whilst ensuring your business receives its full Fuel Tax Credit Entitlement
Eligible businesses can reduce their fuel spend, sometimes by millions of dollars per year, by accurately controlling and tracking fuel consumption. As outlined above, governments have created a range of processes to reduce the fuel excise paid, through up-front discounts, percentage tax rebates, or by reimbursing a specific number of cents per litre. One thing that is consistent with these processes is that the responsibility falls upon the business seeking the benefit, to follow the process, to be ready for audit, or to face repercussions for non-compliance.
Fuel management systems such as Banlaw’s ResTrack solution can automatically:
- Ensure only the correct amount of the correct fluid is dispensed into the correct machine
- Reconcile your fuels from buy to burn, all the way to the consuming asset
- Capture data and prepare reporting to support fuel tax credit rebate claims and make government audits a stress-free experience
Contact Banlaw now to get superior control of your High-Value Fluids
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