FEDERAL BUDGET: $5bn handed out in tax credits

ATO hands out $5 billion in fuel tax credits this year, but cost of scheme is due to rise

By Brad Gardner | May 12, 2010

The Australian Taxation Office (ATO) will hand out more than $5 billion under the Fuel Tax Credits Scheme this year, amid projections the cost of the program will significantly rise.

Budget papers show the ATO spent $5.11 billion administering the credits scheme this financial year.

The program is designed to help businesses that use fuel, and according to budget forecasts the ATO is about to get a lot busier.

The cost of administering fuel credits will rise to $5.16 billion in 2010-11 and $5.28 billion in 2011-12. According to the forward estimates, the figure will rise to $5.68 billion in 2012-13 and $5.79 billion the following year.

"The Fuel Tax Credit Scheme provides fuel tax relief in the form of fuel tax credits...for fuel used in business activities, machinery, plant, equipment and heavy vehicles," budget papers say.

Operators claim the credit against the fuel excise rate, which is 38 cents a litre. The Rudd Government rejected a recommendation from Treasury Secretary Ken Henry to index the excise.

The fuel tax credit operators can currently claim will fall 0.9 cents from 16.44 to 15.54 cents a litre from July 1 this year due to a 4.2 percent rise in heavy vehicle charges.

The charges, which will also increase registration fees by 4.2 percent, were approved by the nation's transport ministers based due to a 10.7 percent increase in government expenditure on the road network.

Green groups have long pushed for an end to the scheme, which the transport industry has supported as a means of keeping operator costs down.

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