The fuel tax credit scheme
is a road tax

The fuel tax credit scheme is not a subsidy.

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“Fuel tax credits are not a subsidy for fuel use, but a mechanism to reduce or remove the incidence of excise or duty levied on the fuel used by business off road or in heavy on road vehicles.”

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Treasury, Submission to G20 Energy Experts Group

 

The use of diesel machinery and vehicles underpins the operation of some of Australia’s most important sectors, including mining, agriculture, forestry, regional tourism, construction, transport and manufacturing.
 

Many of these sectors are based, or have large investments, in rural, regional and remote Australia. Fuel is a vital input for a range of businesses in these sectors. Diesel is used off-road in vehicles, generators for power supply and in heavy equipment.
 

The Fuel Tax Credits Scheme ensures these businesses are not disadvantaged by paying a road tax for diesel used for machinery and vehicles that don't use public roads.
 

Beyond industrial use, diesel is also used for emergency services vehicles, regional tourism infrastructure and domestic household power generation.
 

Fuel tax credits are not a subsidy for fuel use, but a mechanism to reduce or remove the incidence of excise or duty levied on the fuel used by business off road or in heavy on-road vehicles.
 

The Fuel Tax Act 2006 automatically operates to offset the government’s excise for off-road use of fuel by businesses and non-transport uses of fuel such as electricity generation.
 

It should be remembered that energy access is restricted in the regions.
 

Generators of off-grid electricity are located from the north east of Queensland to the Pilbara in Western Australia and from Darwin in the Northern Territory to King Island in Tasmania.
 

Any move to reduce fuel tax credits would introduce a tax distortion by imposing a tax on industries that are reliant on diesel fuel to generate power and operate heavy machinery.
 

It would also create financial hardship for some of Australia’s most remote communities.

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It has always been accepted that if diesel is not being used on public roads but instead is being used to grow food, extract minerals, generate power or harvest the ocean, then a road user charge should not apply.