Katerina Swanson
The fuel excise tax in Australia has been a topic of much discussion, with the federal government's decision to cut it by half in 2022, providing relief to motorists facing high petrol costs. This reduction was in response to the economic uncertainty caused by the Russia-Ukraine war, which impacted global oil production. While this move was welcomed by many, concerns were raised about its cost and skewed benefits favoring higher-income households. The fuel excise tax in Australia is subject to adjustments twice a year, indexed to the consumer price index (CPI). As of February 2024, the excise rate was close to 50 cents per litre, with the government's latest increase. In addition to the excise, a 10% Goods and Services Tax (GST) is levied on fuel prices, leading to criticisms of double dipping by the government. Australia's fuel excise rates remain relatively low compared to other OECD countries.
| Characteristics | Values |
|---|---|
| Main fuel tax in Australia | Excise tax |
| GST | 10% |
| Excise duty rates increase | July each year for biodiesel |
| Excise duty reduction | From 30 March to 28 September 2022 |
| Excise duty rates change | Other law changes |
| Fuel excise tax | $0.442 per litre on unleaded petrol fuel (as of 1 February 2022) |
| Fuel excise tax | $0.442 per litre on diesel fuel (as of 1 February 2022) |
| Petrol for use as fuel in aircraft | $0.03556 per litre |
| Excise tax cut | 50% from April 1 to October 1, 2022 |
| Excise tax | 22.1 cents per litre for all road fuels (after the cut) |
| Excise tax | 44.2 cents per litre (before the cut) |
| Excise tax increase | 38.6 cents per litre (from 10 November 2014) |
| Excise tax increase | 49.6 cents per litre (from 5 February 2024) |
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What You'll Learn
Fuel excise tax rate history
The excise and customs duty on petroleum fuel in Australia is one of the oldest tax bases of the Australian Government, applying since Federation in 1901. There have been numerous changes to petroleum taxation since Federation, involving changes in fuels covered, rates, exemptions, credits and indexation arrangements. For some of that time, there has been a link between the amount of excise raised and road funding. The formal link to road funding most recently ceased in 1992. Since then, fuel tax has been a general revenue-raising tax with only a minor link with the Australian Government’s overall level of road funding.
In 1997, several states levied fuel franchise fees until the High Court of Australia ruled in Ha v New South Wales that a licence fee based on the value of tobacco was unconstitutional, as it was an excise tax that only the Commonwealth could levy. This ruling brought the revenues of the states into question, and as a result, the federal government introduced a fuel excise tax and distributed the revenue to the states. Queensland, for example, used to provide an 8.354c/L subsidy on most fuel sales, which was reflected by an 8.354c/L price difference at the pump.
The main fuel tax in Australia is an excise tax, to which goods and services tax (GST) is added. In Australia, the GST (currently 10%) is applied on top of the fuel excise tax. In some cases, businesses may be entitled to exemptions or rebates for fuel excise tax, including tax credits and certain excise-free fuel sources. The "double dipping" (GST imposed on the excise tax) was fully compensated for by lowering the excise at the time the GST was introduced in 2001. While the excise stopped being indexed for inflation in 2001, indexation was reintroduced in 2014.
The excise duty rates for fuel and petroleum products (other than aviation fuels and certain petroleum-based products) are indexed twice a year, based on the upward movement of the consumer price index (CPI). Usually, indexation occurs on 1 February and 1 August. However, when the Australian Bureau of Statistics (ABS) does not publish the CPI figure at least five days before indexation day, the indexation day is pushed back to the fifth day after publication.
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How fuel excise tax is calculated
In Australia, the main fuel tax is an excise tax, which is levied by the federal government. The Australian Taxation Office (ATO) determines the excise duty rates for fuel and petroleum products twice a year, based on the upward movement of the consumer price index (CPI). The Australian Bureau of Statistics (ABS) is responsible for determining and publishing the CPI on or before the last Wednesday of the month following the relevant quarter. Usually, indexation occurs on 1 February and 1 August. However, when the ABS doesn't publish the CPI figure at least 5 days before indexation day, the indexation day is pushed back to the fifth day after publication.
The excise duty rates for fuel include everything except aviation fuels and certain petroleum-based products. As of 1 February 2022, the excise tax on commonly used fuels in Australia was $0.442 per litre on unleaded petrol fuel (including standard, blended (E10), and premium grades) and $0.442 per litre on diesel fuel. From April 1 to October 1, 2022, the federal budget lowered or cut the fuel excise by 50% to 22.1c per litre for all fuels.
In addition to the excise tax, a 10% goods and services tax (GST) is applied to the fuel excise tax, resulting in a "double dipping" effect. This "double dipping" was compensated for by lowering the excise when the GST was introduced in 2001. While the excise stopped being indexed for inflation in 2001, indexation was reintroduced in 2014.
Businesses may be entitled to exemptions or rebates for fuel excise tax, including tax credits and access to certain excise-free fuel sources. Additionally, under the Australian Fuel Tax Credits Scheme, all off-road business use of fuel became eligible for subsidies as of 1 July 2008. This change particularly benefited businesses that do not run large vehicle fleets but consume large amounts of fuel in business processes, such as mining, manufacturing, construction, and plant operations.
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Fuel excise tax and GST
In Australia, the main fuel tax is an excise tax, on top of which a 10% goods and services tax (GST) is applied. Both taxes are levied by the federal government. The excise tax is a flat tax levied on every litre of fuel sold to consumers, and the proceeds are used for infrastructure development and maintenance.
The fuel excise tax rate is adjusted twice a year, on 1 February and 1 August, in line with the consumer price index (CPI) as determined by the Australian Bureau of Statistics. This biannual indexation was reintroduced in 2014 or 2015 after being stopped in 2001 due to the introduction of the GST. The excise duty rates may also change due to other law changes. For example, from 30 March to 28 September 2022, the excise rates for petrol, diesel, and other fuel and petroleum-based products (except aviation fuels) were temporarily reduced by 50% to 22.1 cents per litre. This reduction was implemented to ease the pressure of high petrol costs on Australian families.
The fuel excise tax rate as of 1 February 2022 was $0.442 per litre for unleaded petrol fuel (including standard, blended (E10), and premium grades) and $0.442 per litre for diesel fuel. As of Monday, 5 February 2024, the excise rate increased from 48.8 cents per litre to 49.6 cents per litre.
In addition to the excise tax, the GST is levied on the retail price of fuel (inclusive of the excise). This practice has been criticised as "double dipping" by the federal government, as the GST is imposed on an already taxed product. However, when the GST was introduced in 2001, the "double dipping" was fully compensated for by lowering the excise rate at that time.
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Fuel excise tax cuts
In Australia, the main fuel tax is an excise tax, which includes a 10% Goods and Services Tax (GST). Excise duty rates are indexed twice a year, on 1 February and 1 August, based on the consumer price index (CPI) as determined by the Australian Bureau of Statistics. The excise tax on commonly used fuels as of 1 February 2022 was $0.442 per litre on unleaded petrol fuel and diesel fuel.
In March 2022, the Australian government halved the fuel excise tax, dropping it from 44.2 cents to 22.1 cents per litre for a period of six months. This reduction aimed to ease the pressure of petrol costs for many Australian families, particularly in light of the uncertainty caused by Russia's invasion of Ukraine and its impact on global oil production.
While the tax cut provided some relief to motorists, it also raised concerns about the cost and fairness of the initiative. The government expected the six-month tax reduction to result in a loss of $3 billion in revenue. Critics argued that the initiative disproportionately benefited higher-income households, who incurred a more significant proportion of petrol and diesel costs.
Following this period of reduced excise tax, Australia's fuel excise rose again in line with CPI in February 2024, increasing from 48.8 cents to 49.6 cents per litre. This biannual indexation has been a regular occurrence since its reintroduction in 2014 or 2015.
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Fuel excise tax increases
The fuel excise tax in Australia has been a subject of discussion and has witnessed changes over the years. The main fuel tax in Australia is an excise tax, levied by the federal government, to which a 10% Goods and Services Tax (GST) is added. In 2001, the Howard government adjusted the excise rates due to the introduction of the GST and halted the automatic indexation of the fuel excise tax. This resulted in a decrease in the excise tax to compensate for the GST.
However, in 2014, the Abbott government reintroduced indexation, with the excise rate being adjusted twice a year on 1 February and 1 August, based on the consumer price index (CPI). This biannual indexation has continued, with the latest increase occurring in February 2024, pushing the excise rate closer to 50 cents per litre.
In March 2022, the Australian government made an unprecedented move by halving the fuel excise tax from 44.2 cents to 22.1 cents per litre for six months. This decision was influenced by the uncertainty caused by Russia's invasion of Ukraine and concerns over Russia's role in global oil production. While this provided relief to motorists, it also resulted in a significant loss of revenue for the government, estimated at $3 billion. Critics argued that this measure disproportionately benefited higher-income households, who incurred the majority of fuel costs.
The fuel excise tax in Australia is subject to periodic adjustments, with indexation occurring twice a year based on the CPI. These changes can impact the prices consumers pay at the petrol pump, with the excise being one of the major components influencing fuel prices. Businesses may also be eligible for exemptions, rebates, or fuel tax credits, depending on their fuel usage and industry.
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Frequently asked questions
Australia's fuel excise rate was 49.6 cents per litre as of February 2024.
The fuel excise tax includes a Goods and Services Tax (GST) of 10% levied on the retail price of fuel.
The fuel excise rate is indexed twice a year, on 1 February and 1 August, based on the consumer price index (CPI).
