Lack of consultation and poor understanding of the impact of the fuel excise cut on trucking businesses has short-changed the industry and produced a red-tape nightmare
In the wake of unintended consequences arising from the Australian Government’s decision to reduce fuel excise by 22.1 cents per litre (cpl) for six months, the Australian Livestock and Rural Transporters’ Association has made representations to key politicians recommending that the road user charge also be immediately reduced by 22.1 cpl.
The impact of this change would be to reinstate the fuel tax credit of 17.8 cpl. Any change or indexation of fuel excise or the road user charge should also be delayed until after the temporary relief period.
ALRTA national president Scott McDonald says that the lack of consultation and poor understanding of the impact of the fuel excise cut on trucking businesses has short-changed the industry and produced a red-tape nightmare.
“The National average price of diesel has increased by 58.0 cpl since December 2021. Trucking businesses have limited capacity to pass on such dramatic increases,” says McDonald.
“ALRTA appreciates the Australian Government’s attempt to provide temporary relief from soaring fuel prices. Given that transport costs are embedded in almost all Australian goods and services, reducing fuel excise by 22.1 cpl has potential to reduce business costs and cost-of-living pressures for all Australians.
“However, the effective net benefit for heavy vehicle operators is just 4.3 cpl, not 22.1 cpl.
“This is because trucking businesses pay an effective fuel duty rate of 26.4 cents per litre, not the full rate of 44.2 cpl paid by other motorists. Our normal 17.8 cpl fuel tax credit for on-road fuel use will be reduced to zero.
“On the surface, it would seem that a 4.3 cpl net fuel discount is better than no relief at all. However, this perspective does not appreciate the contracting chain and cash flow implications within the trucking sector.
“Firstly, most customers have heard that fuel excise has been reduced by 22.1 cpl. Many are now demanding a commensurate reduction in their freight rates.
“Secondly, operators with agreed fuel levies in place are now at the mercy of contracting parties. This is because fuel levies are adjusted with reference to bowser prices. When such contracts are enforced, the transport operator must accept lower freight rates, cutting into profit margins or perhaps even resulting in a loss.
“Thirdly, explaining the current situation to customers and attempting to renegotiate contracts on a temporary basis for the next six months is time consuming and frustrating for all parties. Most operators feel it is simply not worth the effort for such a small net cost reduction.
“Fourthly, trucking businesses use fuel tax credits as a cash flow management tool to offset other government taxes for which they are liable. With the previous 17.8 cpl fuel tax credit now effectively reduced to zero, businesses will now need to accumulate and set aside cash to pay taxation liabilities. This is a ticking time bomb for many road transport businesses that do not as yet fully understand this element.
“Lastly, ALRTA is aware of members who have approached their accountant for advice, only to be told that fuel tax credits will continue to apply. In one such incident, a member made three separate approaches before their accountant finally provided correct advice.
“Consultation with the trucking sector prior to the fuel excise reduction announcement was severely lacking. Consequently, the real impact of the change was poorly understood by policy makers.
“As I understand it, neither the ALRTA nor the Australian Trucking Association were contacted by Treasury to discuss the proposed measures. Further, our associations have established that Treasury did not even consult with the ATO.
“This is a significant consultation failure given the obvious taxation implications and operational impact on trucking businesses.
“The last time our trucking associations were not properly consulted, Australia experienced empty supermarket shelves for the first time in decades. No one wants that repeated.
“Australian truck drivers have carried the nation through drought, fires, floods, COVID-19 and now soaring prices for fuel and adblue. The last thing Australia needs is further pressure on our road transport supply chain via ill conceived, albeit well intentioned, taxation changes.
“The only way to fix this problem is to immediately reduce the road user charge by 22.1 cpl and reinstate the fuel tax credit.
“If the ALRTA recommendation was implemented, trucking operators would receive an effective fuel cost reduction of 22.1 cpl that would remain stable during the temporary relief period. They would be able to honour contractual fuel levy obligations and maintain current cash flow arrangements.
“Importantly, trucking operators would be able to pass on savings by way of lower freight costs to customers, and ultimately, consumers to achieve the government’s intended cost-of-living relief.
“With the fuel excise cut expected to flow through to bowser prices within the next week, this matter requires prompt attention and action,” McDonald concludes.