The Federal Government will cut petrol and diesel excise by 22 cents per litre for six months in a move designed to take the edge off current record fuel prices.

The flat fuel tax will be halved tonight from its current 44.2 cents per litre which, if passed on at the bowser, would cut the cost of filling a Toyota Corolla by about $10 per tank over this timeframe.

“A family with 2 cars who fill up once a week could save around $30 a week or around $700 over the next 6 months,” said Treasurer Josh Frydenberg, adding fuel subject to the lowered excise rate was expected to flow through to the majority of service stations within a few weeks.

The flipside is the tax cut will come at a reported cost of around $3 billion to government coffers, mostly allocated to land transport projects.

The Australian Competition and Consumer Commission (ACCC) said it expected fuel retailers to pass on the cut in full once they’d bought in new stocks.

“We will contact petrol retailers to set out our clear expectations that the savings are passed on to consumers and advise them that we will be monitoring their margins. We will also continue to inform consumers of retailer behaviour,” said ACCC Chair Gina Cass-Gottlieb.

“…If retailers make false or misleading statements to consumers that they have passed on the savings when they have not, the ACCC will not hesitate to take appropriate enforcement action.”

The Australian Automotive Association (AAA), peak organisation for Australia’s motoring clubs, was critical, saying the move would generate “more medium-term challenges than it solves”.

“The decision to booby-trap the Commonwealth Budget with a 22.1cpl fuel excise cut for the next six months will fix neither Australia’s transport tax problems, nor the factors driving up petrol prices,” it contended.

“The AAA notes the change may possibly offer some short-term relief for motorists in a volatile global fuel market, but believes it generates more medium-term challenges than it solves.

“The immediate problem is that there is no guarantee that this tax cut will be passed on to motorists, as the international experience shows similar measures have delivered fuel retailer profits, rather than price drops for consumers.

“The AAA looks forward to understanding how the Government will police this change.”

Meanwhile the peak body for Australia’s car brands, the Federal Chamber of Automotive Industries (FCAI, last week called for a simpler and broad-based road user charge to replace myriad taxes including the fuel excise.

“Recent focus on the rising cost of living in Australia has reinvigorated debate on the fuel excise. This presents an unprecedented opportunity to scrap ineffective and antiquated taxes on Australian motorists,” it said.

FCAI chief executive Tony Weber said a single road user charge (RUC) – like that being applied by Victoria on EVs – could replace “charges such as registration, fuel excise licence fees, luxury car tax and sales tax”.

“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,” Mr Weber said.

Mike Costello
Mike Costello is a Senior Contributor at CarExpert.
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