Return of the FTC: a much needed win for small operators

fuel levy

Did you hear that sigh of relief that went out across Australia this week?

It was the sound of transport operators breathing a little bit easier as the temporary Fuel Tax Excise reduction expired, and Fuel Tax Credits (FTC) were reinstated, along with a 1 cent increase to 18.8 cents per litre.

Before we break out the party poppers and balloons, there’s a catch. The underlying rate of the excise increased by 1.8 cents per litre compared to the period prior to the reduction, and the heavy vehicle Road User Charge (RUC) also increased by 0.8 cents. Still while it might feel like giving with one hand and taking away with the other, there’s at least one reason to celebrate: transport operators know where they stand.

“These changes give our industry one important thing: certainty,” said Simon O’Hara, CEO of Road Freight NSW.

“The past two and a half years have been incredibly disruptive, from the pandemic and lockdowns to floods and fires. If that wasn’t enough, there was the headache created by the fuel excise reduction, the AdBlue crisis and staff shortages in an industry that was already struggling to attract and retain talent before ‘The Great Resignation’.”

And let’s not forget customers who can sometimes be allergic to price increases even though the cost of everything from fuel to labour has skyrocketed.

Consequently, many operators are feeling like they are copping it from all sides and are close to walking away from the industry entirely. Many of them will take any relief that they can get.

“We weren’t classified as essential workers, even though we are essential. We worked full tilt through the pandemic, and many operators haven’t had a break. Truckies and road freight operators need more than a pat on the back for this marathon of effort. We need substantive help,” said O’Hara.

Providing a route forward

Which brings us back to FTCs. Being able to claim them again is not going to solve all the industry’s woes, but it will help ease some burdens – if operators actually claim their due.

“The transport industry has been going through a world of pain over the last few years because of a combination of factors including increased operating and compliance costs and staff shortages.  This was compounded over the past six months because of the federal government’s FTC suspension, said Peter Perich, director at PPM Tax and Legal.

“The FTC reinstatement is welcomed, but at the same time, they’ve also increased the full rate of excise payable at the pump and the Road User Charge.  To minimise the effect of this, it’s a good time for operators to review their current and past FTC claims with a view to apportioning fuel between on and off-road usage and maximising their returns.”

However, claiming FTC has traditionally had its challenges, as it relied on operators to calculate how much of their fuel use was off public roads.

Many just underestimated their claim for fear of running afoul of the tax collector. This started changing around five years ago when products that used real-time GPS data to automatically calculate off-road fuel consumption, off-road idle time and auxiliary fuel usage emerged. They now had accurate information ready when they need it.

But much of the take up of these products have been in larger and medium sized operators. Adoption of technology is often slower for small and solo operators because the risk of investing in something that’s a nice-to-have rather than a must-have is too high, and they don’t have time to properly assess their needs to ensure they are making the right choice.

Especially when they are most likely having to wear every hat in the business and so don’t have the capacity to take the short-term hit of adopting a new process, even if it would provide long-term benefits.

Which is unfortunate because that’s exactly who has been suffering most from the recent disruptions, because they don’t have the systems and means to quickly adjust to changing demands or the margin to erode their profits.

In some instances, small operators were forced to absorb losses of as much as $200,000 and delays of up to 90 days before being able to pass on cost increases to the customers.

“Small operators were particularly affected by the decision to cut the fuel excise and consequently the fuel tax credits and when they complained, the response was too often ‘we didn’t think of that’. We’d like to see an end to policy making on the fly, but also ensure small family businesses – the backbone of the freight industry  – are able to claim all their entitlements” said O’Hara.

“Because despite these significant challenges, the freight industry has performed and continues to perform exceptionally and beyond expectations.”

The past few years have been tough on all of us. With the return of the FTC, it’s a much-needed opportunity for small operators to make a mark in the ‘win’ column.

About the author:

Anthony Laras is the national manager, transport for Teletrac Navman.

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