Regan Brown
Fuel excise tax is a significant cost for Australian consumers, with the federal government collecting a substantial portion of the price paid at the pump. The fuel excise is a flat tax applied to every litre of petrol or diesel purchased by Australian consumers, and it is adjusted periodically, with rates typically rising. In addition to the fuel excise, consumers also pay a Goods and Services Tax (GST) of 10% on the retail price of fuel, leading some to argue that the fuel excise is a tax on a tax. This combination of excise tax and GST means that Australian consumers pay a notable amount in taxes on their fuel purchases.
| Characteristics | Values |
|---|---|
| Main Fuel Tax | Excise Tax |
| Excise Duty Rates | Per litre, kilolitre or kilogram of product |
| Excise Duty Rate for Fuel and Petroleum Products | Twice a year, based on the upward movement of the consumer price index (CPI) |
| Fuel Excise Tax Rate | 46 cents per litre (CPL) as of 29 September 2022 |
| Fuel Excise Tax Rate | 49.6 cents per litre as of 2024 |
| Goods and Services Tax (GST) | 10% |
| Fuel Tax Credits for Petrol and Diesel | $7.3 billion |
| Fuel Excise Contribution to Budget | $9.6 billion |
| Fuel Excise Credits (FTC) on Diesel and Petrol | $11.5 billion |
| Fuel Excise Tax Rate | $0.442 per litre on unleaded petrol fuel as of 1 February 2022 |
| Fuel Excise Tax Rate | $0.442 per litre on diesel fuel as of 1 February 2022 |
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What You'll Learn
Excise duty rates
In Australia, the excise duty rate for fuel is not a fixed value as it depends on the fuel type and the indexation arrangements in place. The Australian Taxation Office (ATO) is responsible for the collection of fuel excise duties, and the rates are subject to periodic adjustments. Here is a detailed breakdown of the excise duty rates for various fuel types in Australia:
Petroleum-based fuels:
Petrol (including
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Fuel tax credits
Businesses can claim FTCs through their business activity statement (BAS), which they lodge monthly, quarterly, or annually, depending on the business size. To claim FTCs, businesses must be registered for GST and fuel tax credits beforehand and keep records from the start of their business activity to calculate the credits accurately.
The eligibility criteria for FTCs vary, and businesses only need to satisfy one of the four environmental criteria. Vehicles manufactured on or after 1 January 1996 are eligible under Criterion 1, while Criteria 2, 3, and 4 are options for vehicles of all ages. Owner/operator servicing is acceptable under Criterion 4 if maintenance requirements are met and relevant records are kept.
FTC rates change regularly, so it is essential to check the rates each time a business activity statement is completed. The Australian Taxation Office provides tools and calculators to help businesses determine their eligibility and calculate their claims.
The Australian government introduced the Fuel Tax Credits Scheme in two phases. The first phase made all off-road business use of fuel eligible for subsidies. The second phase, which came into effect on 1 July 2008, benefited businesses that consume large amounts of fuel in their operations, such as mining, manufacturing, and construction.
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GST on fuel excise
In Australia, the main fuel tax is an excise tax, which includes the goods and services tax (GST). Both taxes are levied by the federal government. The GST, currently at 10%, is applied on top of the fuel excise tax.
The introduction of the GST in 2001 led to "double dipping", where GST was imposed on the excise tax. This was addressed by lowering the excise tax at the time. The excise tax also stopped being indexed to inflation in 2001, but indexation was reintroduced in 2014. The indexation is based on the consumer price index (CPI) and occurs twice a year, on February 1 and August 1.
Excise duty rates for fuel are expressed per litre, kilolitre, or kilogram and are determined by the Australian Bureau of Statistics (ABS). The rates may change due to law changes and do not apply to aviation fuels and certain petroleum-based products.
The fuel excise tax was temporarily halved in the 2022-23 Budget, resulting in a significant impact on the CPI and contributing to a reduction in fuel prices. This temporary reduction ended on September 29, 2022, leading to an increase in the excise rate and, consequently, GST-inclusive fuel prices.
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Fuel tax compared to other countries
Australia has a relatively low fuel tax rate compared to most other OECD countries. The fuel excise tax in Australia is levied by the federal government and contributes to general revenue. The fuel excise is a flat tax levied on every litre of petrol or diesel sold to Australian consumers, and the proceeds go toward maintaining and developing infrastructure and roads throughout Australia. The excise duty rates for fuel and petroleum products (except aviation fuels) are indexed twice a year, based on the consumer price index (CPI). The current excise tax rate is AUD 0.442 per litre on unleaded petrol fuel and diesel fuel. In addition to the fuel excise tax, the Goods and Services Tax (GST) is also levied on the retail price of fuel at a standard rate of 10%.
In comparison, other countries have different approaches to fuel taxation. For example, the Netherlands has one of the highest fuel tax rates in the world, with a gas tax of approximately AUD 1.37 per litre. Italy also has a high fuel tax rate, with a gas tax of approximately AUD 1.28 per litre. On the other hand, Hungary has a relatively low fuel tax rate, with a gas tax of approximately AUD 0.52 per litre.
The fuel tax rates in different countries can vary due to various factors, including the country's economic situation, energy policies, and environmental goals. Some countries may use fuel taxes as a way to reduce carbon emissions and encourage the adoption of electric vehicles, while others may rely more on taxes from other industries.
In Australia, there have been discussions and proposals regarding the potential impact of increasing EV adoption on fuel excise collection. While some states, like Victoria, proposed a road tax for EV owners, it faced opposition and was ruled unconstitutional by the Australian High Court in 2023. As the number of electric vehicles increases, it is likely that the Australian government will need to reconsider its infrastructure funding methods and potentially introduce new taxes to compensate for the loss of revenue from the fuel excise.
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History of fuel tax in Australia
Fuel taxation in Australia has a long history, with the excise and customs duty on petroleum fuel being one of the oldest tax bases of the Australian Government. Here is a detailed overview of the history of fuel tax in Australia:
Early Beginnings (1901-1928)
The taxation of fuel in Australia commenced in 1901, the year of Federation. Initially, the focus was on taxing diesel and petroleum imports, as there was no local production of these resources. The revenue generated from these taxes was directed towards funding the country's emerging road network.
Local Production and Excise Duty (1928)
In 1928, Australia began local production of diesel and petroleum products, leading to the introduction of an excise duty. This excise duty, distinct from a tax, was imposed at the time of manufacture rather than sale, and it amounted to 1 penny per gallon, equivalent to approximately 0.18 cents per litre.
Expansion and Maintenance (1957)
The fuel excise underwent a significant revision in 1957, when diesel vehicle operators were also included in contributing to the expansion and maintenance of the country's road network. To balance this change, the first excise exemption was introduced, limiting the charge to only on-road uses of diesel fuel.
Aviation Industry and Taxation (1957-1995)
Around the same time, in response to the booming aviation industry, the government imposed a new duty on aviation turbine kerosene, regardless of its source of origin. This was necessary to support the development of new airports and routes across the country. The connection between revenue from aviation fuel taxes and funding for the aviation industry was formally established in 1995, with the financial requirements of the Civil Aviation Safety Authority and Airservices Australia influencing the excise rates on aviation fuels.
Link to Road Funding Strengthened (1982-1988)
After a temporary break in the direct connection between fuel taxes and road funding in 1959, the Australian Bicentennial Road Department Trust Fund Act of 1982 re-established this link. This legislation included a surcharge of 1 cent per litre on the excise of petrol and diesel, which was doubled the following year. The Act was subsequently replaced by the Australian Land Transport Development Act of 1988, which remains in effect today.
Indexation and Adjustments (1983-2001)
In 1983, the Commonwealth introduced a twice-yearly indexation for the consumer price index of fuel excise taxes. However, in 2001, the Howard government adjusted the excise rates due to the introduction of the Goods and Services Tax (GST). As a result, the automatic indexation of the fuel excise tax was halted.
Fuel Tax Credits and Exemptions (2001-2008)
The introduction of the GST in 2001 led to a full compensation for the "double dipping" effect by lowering the excise rate. Additionally, the second phase of the Australian Fuel Tax Credits Scheme took effect on July 1, 2008. This change provided subsidies for all off-road business use of fuel, benefiting businesses that consume large amounts of fuel in processes like mining, manufacturing, and construction.
Reintroduction of Indexation (2014)
In 2014, the Abbott government reintroduced the indexation of the fuel excise tax, with adjustments occurring twice a year on February 1 and August 1. This indexation is based on the upward movement of the consumer price index (CPI), with the Australian Bureau of Statistics (ABS) responsible for its determination and publication.
The history of fuel tax in Australia has been characterised by evolving policies, exemptions, and adjustments, reflecting the changing needs of the country's infrastructure, industries, and economic landscape.
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Frequently asked questions
As of February 2024, the fuel excise tax in Australia was 49.6 cents per litre, which is close to 50 cents. In addition to this, there is a Goods and Services Tax (GST) of 10% levied on the retail price of fuel.
The fuel excise duty rates are indexed twice a year, on 1 February and 1 August, based on the consumer price index (CPI). The Australian Bureau of Statistics (ABS) determines and publishes the CPI.
The main fuel tax in Australia is an excise tax, which is levied by the federal government. In addition to this, there is also a Goods and Services Tax (GST) of 10%.
As per Mark McKenzie, CEO of the Australasian Convenience and Petroleum Marketers Association (ACAPMA), in 2024, approximately 34% of the average retail price of fuel was made up of federal government taxes.
