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FCAI calls for fuel tax reform

BRASS TAX: The FCAI calls on the federal government to review its outdated fuel excise strategy.

Record fuel prices prompt calls to scrap ‘antiquated’ taxes

28 Mar 2022

RECORD fuel prices attributed to the impact of the Russian-Ukrainian war have prompted calls from the FCAI to address what it says are ineffective and antiquated taxes levelled at Australian motorists.


With the price of unleaded now more than $2.00 per litre, and an associated rise in the cost of living from heftier transport and logistics costs, FCAI chief executive Tony Weber says now is the perfect time for policy makers to seriously examine the merits of a broad-based road-user charge scheme which would replace a range of outdated and inefficient taxes.


“Since the release of the FCAI’s discussion paper on road-user charging (in May 2021), some State Governments have announced plans to introduce a road-user charge for the owners of electric vehicles as part of their zero emission strategies,” said Mr Weber.


“Our view is that Governments can take this further and apply a road-user charge to all vehicles, regardless of their engine type.”


Mr Weber said the transition to road-user charging was a progressive step in national tax reform and, that under current conditions, Governments have an unprecedented opportunity to scrap existing fuel-tax structures.


“Importantly, a road-user charge (RUC) is not an additional tax on motorists. Instead, it can replace myriad charges such as registration, fuel-excise licence fees, luxury-car tax and sales tax. The reduction in complexity also presents an opportunity to reduce the large bureaucracies required to administer these inefficient taxes and charges, providing additional economic benefit,” he said.


“State and Territory Governments are beginning to adapt to the changing nature of mobility in Australia, including the rise of electric vehicles that do not pay fuel excise. Applying RUC more broadly and scrapping taxes like fuel excise and the luxury car tax will ensure that all motorists are paying an equitable amount to use Australia’s road network.”


The majority of the tax collected from the sale of fuel in Australia comes from a flat sales tax or “excise” levied by the Australian government on liquid fuels such as petrol, diesel and LPG purchased at the bowser.


The current rate is 44.2 cents for every litre of fuel purchased. However, this rate is subject to change in line with inflation and is charged in addition to the Goods and Services Tax (GST), currently pegged at 10 per cent. It is estimated that the average household contributes around $1200 annually to government coffers via the fuel-excise scheme.


Separately, a road-user charge is applied to each litre of diesel sold by the owners of heavy vehicles, including trucks and buses. The Government is considering a similar road-user scheme for the owners of electric vehicles who do not currently contribute to the fuel excise via the purchase of liquid fuels.


According to budget papers, Australian motorists will pay nearly $50 billion in net fuel excise over the next four years, of which most of the monies collected ($46.8 billion) will be reinvested in land transport projects. However, with vehicles becoming more efficient, and electric vehicles now more popular than ever, the amount of fuel excise collected by the federal government is declining when compared to actual road use.


“The discussion paper released by the FCAI outlines the opportunities and pathways that are available to Governments for this type of taxation reform. Clearly the details need to be carefully considered to ensure any scheme considers the application of equity for motorists across the country. This is particularly important when considering rural and regional travel, the Australian lifestyle and our tyranny of distance,” said Mr Weber.


“We need this reform to move Australia’s road-tax system from (the past) century and ready it for the future of motoring. Australians want a future that can provide clarity, simplicity, fairness, and value to their wallet. There is no better time than now to bring this future into reality.”


Figures published by Nine News this week show national fuel prices are now above $2.15 per litre for unleaded petrol and over $2.17 per litre for diesel with Tasmanian motorists facing the highest on average cents-per-litre price for fuel on record.


Week-on-week fuel price changes are listed in brackets, below.


National Fuel Price Index (week beginning March 28):

State                    Petrol (cpl)        Diesel (cpl)
Australian Capital Territory        222 (no change)    222 (-0.4%)
New South Wales            219 (+1.9%)        220 (+1.9%)
Northern Territory            229 (+4.6%)        227 (-2.6%
Queensland                219 (-0.9%)        221 (no change)
South Australia                219 (-0.5%)        217 (-4.5%)
Tasmania                231 (no change)    224 (+4.5%)
Victoria                    215 (no change)    219 (no change)
Western Australia            223 (-0.4%)        220 (+4.3%)


With FCAI, Nine News, Australian Automobile Association

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