The road transport, construction industries and remote communities are the likely winners in the Government's new Fuel Tax Bill (2006) introduced into Parliament today.
The road transport, construction industries and remote communities are the likely winners in the Government's new Fuel Tax Bill (2006) introduced into Parliament today.
The additional annual benefits to business will grow from $40 million in the next financial year to over $500 million in seven years time.
KPMG tax partner Phil Renshaw told WA Business News it was difficult to give an estimate of the impact on Western Australian business because the changes would be phased in over six years.
He said the biggest impact for WA will be in 2008 when "certain ineligible activities" come within the fuel credits regime. This will have an impact in areas such as resources, agriculture and construction.
"These will be entitled to a 50 per cent credit of the effective fuel tax paid," Mr Renshaw said.
"This will become 100 per cent of the effective fuel tax paid in July 2012."
In the short term, he said WA business will benefit from the extension of the on-road eligibility criteria to all vehicles over 4.5 tonnes. This is further enhanced by petrol coming into the fuel credits regime.
"Power generation also comes into the credit regime. Currently it relates to diesel used in generating power at residential or retail premises."
Overall, Mr Renshaw said the significant broadening of the eligibility base for tax credits on fuel purchased for business was a positive step but he also noted that the shift to claiming credits through the Business Activity Statement (BAS) may create some transitional issues for business.
"The Fuel Tax Bill is potentially a coup for the road transport sector as they will now be able to claim fuel tax credits on a wider range of vehicles," Mr Renshaw said regarding the new rules in general.
"Although eligibility for on-road vehicles will be widened, Treasury estimates there will be cost savings that will grow from $80 million in the next financial year to $340 million in 2012-13. This disparity may be explained by either tighter compliance requirements or a contemplated increase in road user charges.
"Businesses will face some challenges as a result of the new legislation. The shift from a grant scheme to a tax credit system will cause initial administrative issues since businesses will need to align their fuel tax credits with their GST processes. I expect that the ATO will undertake an awareness and education program to help taxpayers to understand this important change.
"Another challenge for businesses will be the need to comply with new environmental requirements in order to claim fuel tax credits. All businesses claiming fuel tax credits will need to comply with some basic emission control standards and large claimants will also have to join the Greenhouse Challenge Plus program and this may mean more comprehensive fleet management systems will be required," said Mr Renshaw.
The Fuel Tax Bill will widen the eligibility available under the current Energy Grants Credits Scheme to include all fuel used on-road by vehicles between 4.5 and 20 tonnes gross vehicle mass. A range of activities that are currently ineligible to receive off-road fuel grants will also progressively become eligible for a fuel tax credit.
Once the Bill receives Royal Assent, then from July, fuel tax credits will be claimed through the BAS in the same way as GST input tax credits. There will also be increased environmental requirements for eligibility, particularly for major fuel tax credit claimants.
Below is the full KPMG release:
Fuel tax changes - some devil in the detail
The road transport, construction industries and remote communities are the likely winners in the Government's new Fuel Tax Bill (2006) introduced into Parliament today. The additional annual benefits to business will grow from $40 million in the next financial year to over half a billion dollars in seven years time.
But while KPMG tax partner, Phil Renshaw, congratulated the Treasurer for significantly broadening the eligibility base for tax credits on fuel purchased for business, he also noted that the shift to claiming credits through the Business Activity Statement (BAS) may create some transitional issues for business.
"The Fuel Tax Bill is potentially a coup for the road transport sector as they will now be able to claim fuel tax credits on a wider range of vehicles.
"Although eligibility for on-road vehicles will be widened, Treasury estimates there will be cost savings that will grow from $80 million in the next financial year to $340 million in 2012-13. This disparity may be explained by either tighter compliance requirements or a contemplated increase in road user charges.
"Businesses will face some challenges as a result of the new legislation. The shift from a grant scheme to a tax credit system will cause initial administrative issues since businesses will need to align their fuel tax credits with their GST processes. I expect that the ATO will undertake an awareness and education program to help taxpayers to understand this important change.
"Another challenge for businesses will be the need to comply with new environmental requirements in order to claim fuel tax credits. All businesses claiming fuel tax credits will need to comply with some basic emission control standards and large claimants will also have to join the Greenhouse Challenge Plus program and this may mean more comprehensive fleet management systems will be required," said Mr Renshaw.
The Fuel Tax Bill will widen the eligibility available under the current Energy Grants Credits Scheme to include all fuel used on-road by vehicles between 4.5 and 20 tonnes gross vehicle mass. A range of activities that are currently ineligible to receive off-road fuel grants will also progressively become eligible for a fuel tax credit.
Once the Bill receives Royal Assent, then from July, fuel tax credits will be claimed through the BAS in the same way as GST input tax credits. There will also be increased environmental requirements for eligibility, particularly for major fuel tax credit claimants.
