Trucking bosses have been quick to slam the proposed abolishment of the Fuel Tax Credit (FTC) for heavy vehicle operators by the Productivity Commission (PC).
The PC argues that by lowering the cost of diesel for trucking operators the credits make it cheaper to burn fossil fuels, therefore reducing the incentives to switch to alternative, cleaner fuels.
South Australian Road Transport Association Executive Officer Steve Shearer has labelled that argument as “absurd”.
“The vast bulk of heavy vehicle freight movement is linehaul on intercity, rural and often remote routes,” Shearer said.
“Alternative fuel options for that linehaul freight task are simply not available and will not be available as sustainable and affordable options for many decades yet, if at all.
“Some 85 per cent of the road freight task is simply not contestable by rail as its logistically and economically impractical.”
Shearer said the commission’s proposal to abolish the FTC would instead increase the cost of road freight for every product, from food to clothing, bedding and house building materials.
“Resulting in unnecessary and unacceptable increases in the daily cost of living without any gain in environmental outcomes.
“It is time the Productivity Commission performed its research and work in the real world, based on well-researched and proven facts to produce realistic, achievable and appropriate outcomes.”
The Australian Trucking Association (ATA) Chair Mark Parry said the tax on truck fuel would more than double under the PC’s plan to hike truck taxes and phase out FTCs.
Under the FTC system, trucking operators pay an effective fuel tax rate of 32.4 cents per litre rather than the full rate, which jumped to 52.6 cents per litre from February 2.
The commission’s own figures show its plan would more than double the effective fuel tax paid by trucking operators to 66.1 cents per litre by 2035.
Speaking in support of the ATA’s 2026-27 pre-budget submission, which urges the government to reject the plan, Parry said the FTC system reduced the cost of freight for everyone in Australia, as well as our rural exporters.
“Removing fuel tax credits would increase costs for industry and hard-pressed Australian households, who have already had to face a 21.5 per cent increase in electricity prices and an 11.2 per cent increase in childcare fees in 2025,” Parry said.
“Many trucking businesses would not be able to pay the increased fuel tax, which would go up by about 8 per cent each year.
“Trucking businesses have already had to pay a 19 per cent increase in fuel tax over the last three years, as well as dealing with rising costs, extended payment terms, driver shortages and natural disasters.”
Parry said the PC’s plan would not achieve its goal of encouraging decarbonisation.
“The commission’s report does not analyse the effect of removing fuel credits on emissions, but I can save everyone the time and trouble,” he said.
“Its effect would be zero, because it would not address the real world barriers holding back the industry’s adoption of low emission solutions.
“It would not address the engineering reality that there is no single technology available to replace diesel engines.
Parry said many regional communities rely on trucking operators to move and deliver all their daily necessities.
“This requires diesel engines, so the commission’s approach would just be an unavoidable increase in tax.
“For those businesses that do have an alternative to diesel, the effective tax increase would reduce their financial capacity to invest in new vehicles and equipment.”
Parry said instead of taking up the PC’s advice, the government should implement a voucher scheme to reduce the up-front cost of electrification or alternative fuel
options for operators.
“A low carbon fuel standard to encourage the use of renewable diesel and support high productivity and low emission vehicles,” he said.
NatRoad CEO Warren Clark also called for no change to the FTC scheme until a viable Forward Looking Cost Base is developed with a resultant Road User Charge (RUC) applicable to all road users.
Fuel tax credits are one of the top 20 expenditure items in the budget and are forecast to grow by 20 per cent over the next four years.
The tax break will cost $10.8 billion this financial year and grow to about $13 billion by 2028-29, according to the budget papers, with just under half of that going to resources companies, including more than $1.4 billion going to iron ore miners and about $1.4 billion to coal miners.
The same commission report, however, recommended FTCs be retained for miners captured by the Safeguard Mechanism, Labor’s signature emissions reduction scheme.
That requires facilities producing more than 100,000 tonnes of CO² emissions each year to cut their output by 4.9 per cent annually or buy offsets to make up the difference.
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