Fuel tax credits explained for Australian farm businesses

Every litre of diesel or petrol you buy in Australia has fuel excise built into the price. For everyday motorists that tax simply stays paid. But if you run a farm business, much of the fuel you burn in tractors, headers, pumps and generators never touches a public road, and the ATO lets you claim that excise back as a fuel tax credit. For a working farm this is often thousands of dollars a year, yet plenty of eligible businesses claim nothing at all, or claim less than they should. Here is how the system works.

What fuel tax credits actually are

A fuel tax credit is a refund of the excise included in the price of fuel you use for business purposes. It is not a deduction that reduces your taxable income. It is a credit you claim on your Business Activity Statement, and it either reduces what you owe the ATO for the quarter or adds to your refund. The size of the credit depends on the type of fuel and, importantly, how you use it.

Who can claim

Three boxes need ticking before you can claim anything:

• You carry on a business with an ABN.
• You are registered for GST.
• You are also registered for fuel tax credits with the ATO. This is a separate registration, and label 7D will not appear on your BAS until it is done.

If you are a farm business that is registered for GST but has never registered for fuel tax credits, that is the first thing to fix. You can register through the ATO online or ask your tax agent to do it.

Which fuel use is eligible on a farm

The rate you can claim depends on where and how the fuel is used. For farm businesses the broad picture is:

• Off-road use attracts the full credit. That covers tractors, headers and harvesters, irrigation pumps, generators, chainsaws, augers, quad bikes and utes working in the paddock, and machinery moving around the property.
• Heavy vehicles over 4.5 tonnes travelling on public roads are normally eligible at a reduced rate, because a road user charge is subtracted from the credit.
• Light vehicles of 4.5 tonnes or less travelling on public roads are not eligible at all. The dual cab driving into town earns no credit for that trip, even if the trip is for the farm.

This is why the same tank of diesel can be worth different amounts depending on what you put it in. If a vehicle does both on-road and off-road work, you need a fair basis for splitting the litres, such as a logbook or a documented estimate.

How to claim, and why the rates keep moving

1. Record the litres of each fuel type you buy, and tag how they were used: off-road, heavy vehicle on-road, or not eligible.
2. Look up the current rates on the ATO website, or use the ATO fuel tax credit calculator, for the period in which you bought the fuel.
3. Multiply eligible litres by the right rate and claim the total at label 7D on your BAS.

Do not hard-code a rate into your records and forget about it. Rates are normally indexed twice a year, in February and August, and they can also change suddenly. A temporary cut to fuel excise has applied since 1 April 2026, which lowered credit rates, and during the same window the road user charge for heavy vehicles has been set to zero. Always check the ATO rates page for the period you are claiming, and remember that fuel bought before a rate change is claimed at the old rate even if the BAS is lodged after it.

The records you need to keep

• Tax invoices or fuel supplier statements showing the date, quantity and price of each purchase.
• A record of how the fuel was used, separating off-road use from on-road and private use.
• Your worked calculation for each BAS period, so you can show how the 7D figure was reached.
• Keep everything for five years, the same as your other business records.

This is general information, not tax advice. Check your situation with the ATO or a registered tax agent.