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Three months of relief at the pump is enough, according to the Federal Government, which wants its $2.9 billion back.
The Federal Government is on track to end reductions in the fuel excise and heavy vehicle road user charge from 1 July, as scheduled, as work continues on a road user charge to instead tax motorists for each kilometre they drive.
Since 1 April, the fuel excise charged to importers on every litre of petrol and diesel on arrival into Australia has been halved from 52.6 to 26.3 cents, while the 32.4c/L heavy vehicle road user charge for buses and trucks has dropped to zero.
The latest Federal Budget documents show the three-month fuel excise cut is estimated to cost $2.9 billion in forgone tax revenue, and will see projected earnings from the tax rise by 24 per cent next financial year.
Budget documents note a $3.8 billion shortfall in fuel excise and heavy vehicle road user charge revenue for the financial year ending 30 June 2026, and a further $350 million gap in 2026-27.
| Petrol | $6.32b | $7.72b | $7.85b | $7.98b | $8.08b |
| Diesel | $14.96b | $18.82b | $19.67b | $20.52b | $21.42b |
| Other | $1.5b | $1.72b | $1.75b | $1.78b | $1.83b |
| Total excise | $22.78b | $28.26b | $29,27b | $30,28b | $31,33b |
| Year-on-year increase | – | 24.1 per cent | 3.6 per cent | 3.5 per cent | 3.5 per cent |
However, revenue from the fuel excise, reported at $22.78 billion for 2025-26, is forecast to rise 24 per cent in 2026-27, to $28.26 billion.
Forecasts settle from there, with projected income from the fuel excise stepping up just 3.5 per cent, or $1 billion per year, up to financial year 2030-31.
Two-thirds of fuel excise revenue comes from diesel, with the remainder split between 26 per cent petrol and 6 per cent other fuel products, though the excise accounts for only about 4 per cent of all federal tax revenue.
Despite the forecast revenue increase, up 37.5 per cent over four years, the growth of hybrid and electric cars – which accounted for 46 per cent of all new cars delivered last month – are said to be impacting earnings from the fuel excise, prompting discussion for a nationalised ‘road user charge’.
“Consistent with the recommendation of the Economic Reform Roundtable, the Government is continuing to work with states and territories on the development of a road user charge for electric vehicles to ensure fair and sustainable funding for road investment and maintenance,” budget reports say.
The current fuel excise is a federal tax, while individual vehicle registration is managed by the states, suggesting the development and implementation of such a program would need support both federally and from the states and territories.
A road-user charge for electric and plug-in hybrid cars introduced by Victoria was thrown out by the High Court in 2023, ruling that only the Federal Government has the power to implement such a tax.
Despite a very ‘low emissions’ focus to the budget, the Government has also reiterated its commitment to a $1.1 billion investment into the development of low-carbon liquid fuels in Australia, predominantly intended for use in aviation and agriculture.
With over 20 years of experience in digital publishing, James Ward has worked within the automotive landscape since 2007 and brings experience from the publishing, manufacturer and lifestyle side of the industry together to spearhead Drive's multi-media content direction.
