This week – as the industry continued to recover from the financial consequences of a two-year pandemic, was restoring critical fuel services in major flood areas in Eastern Australia, and fuel businesses were grappling with the cash flow impacts of a rapid rise in wholesale prices created by the Russia/Ukraine conflict – the Federal Treasurer announced that there would be a temporary cut to fuel excise for 6 months. The Treasurer announced that this cut would come into effect at midnight of the same day, just 4 hours after his 2022 Budget address in the Australian Parliament on the night of Tuesday, 29 March 2022.

The Federal Treasurer (the Hon. Josh Frydenberg MP) announced that the fuel excise would be reduced from 44.2cpl to 22.1cpl from 12.01 am on 30 March 2022 and would be restored to the higher level at 11.59pm on 28 September 2022.

ACAPMA, like everyone else, first learned of the proposed change in excise via national media statements made by the Treasurer on Sunday 27 March 2022 – just two days earlier.

“There was no detail of the proposed change given that this was a pre-budget announcement and so we, unfortunately, had to wait like everyone else to learn about the detail of the cuts when the Treasurer handed down the Budget two days later,” said ACAPMA CEO Mark McKenzie.

“That did not stop us from raising concerns with the Treasurer’s office about the likely delay in these cuts being passed through to motorists, given that there is generally somewhere between 700 million and 900 million litres of fuel that has already travelled past the excise collection point (i.e. the Terminal gate) at any point in time”, said Mark

Thankfully, the Treasurer explicitly stated that it would potentially be up to 2 weeks before prices would fall at the pump given the large amount of fuel already in the national network that had been subject to the previous higher excise rate.

The Treasurer’s statement nonetheless exposed our industry to ill-informed criticism by the media and some motoring clubs. These critics demonstrated that they simply did not understand that fuel is constantly flowing and that excise is charged at the terminal gate and not the servo – and therefore there would be a need to for this higher excise fuel to ‘wash’ through the network before it could be replaced by fuel bought by servos at the lower excise rate. Further, the duration of the process would vary across the network depending on stock levels and daily turnover rates and individual pricing decisions by retailers.

“It was somewhat ironic that our industry was being criticised on Monday (for the likely 5 to 7 days delay in the delivery of lower retail prices) and then, just three days later, I was doing media interviews about why the price had dropped so fast in large cities like Melbourne and Sydney”, laughed Mark.

“While the debate about the timing of the retail pass-through was raging, our attention turned to the issue of bulk fuel sales and the consequent reduction of the Fuel Tax Credit – which did not take account of the quantity of fuel that had already been sold at the higher excise rate”, said Mark.

In effect, when the fuel excise rate was lowered so too was the Fuel Tax Credit – the amount that bulk customers (e.g. Farmers, Miners, construction companies and road transport operators) could claim back from the Australian Tax Office for expenditure on fuel.

This was a big ‘miss’. It meant that these customers were going to have to find an additional 22.1cpl to pay for the fuel that had already been accumulated by fuel distributors around the country – or that Fuel Distributors were going to have to cop a loss on very significant volumes.

In practice, the failure to recognise this issue meant that fuel distribution and wholesale businesses had potentially experienced a substantial write-down in the valuation of their stocks – in some cases, member businesses were advising of potential overnight losses of more than $600,000.

“Needless to say, we raised this issue on Budget night with officials and then spent all of the following day in meetings with senior Treasury and Taxation Office officials to devise a solution that could be put in place quickly to address this issue for bulk customers”, said Mark

ACAPMA was advised that the ‘best’ options for business, such as a refund of 50% of the excise for accumulated stock, required legislative change via the Parliament and would therefore require lengthy deliberations.

Accordingly consideration was given to an alternative ‘administrative fix’ noting that the problems were largely a temporary hit to cash flows. That is, the excise on accumulated stock would be double the fuel tax credit available for bulk customers at the start of the 6-month period (on 30 March 2022) but the excise on accumulated stock would be half the available fuel tax credit for bulk customers at the end of the discount period (i.e. 28 September 2022).

So, now that the dust is starting to settle on this issue, the following provides a summary of the new excise arrangements and the consequent impacts for fuel wholesalers, fuel retailers and their customers:

The changed excise arrangements

The fuel excise rate for transport fuels (petrol and diesel) was reduced from 44.2cpl to 22.1cpl for all fuel sold into the market after 12.01am on Wednesday, 30 March 2022. This reduction is temporary and will remain in place for a period of 6 months, ending at 11.59pm on Wednesday 28 September 2022.

Fuel Tax Credits (wholesale customers)

The Fuel Tax Credit (FTC) rates have been adjusted in line with the new fuel excise rates. Businesses operating vehicles and machinery on private roads (e.g. farming and mining businesses) will continue to receive a tax credit equal to the reduced fuel excise rate (i.e. 22.1cpl) for fuel purchased after 12.01am on Wednesday, 30 March 2022.

Road Transport operators will no longer receive an FTC and will revert to payment of the reduced fuel excise during the period of excise reduction. This amounts to a net reduction in the effective rate of the ‘Road User Charge (RUC)’ of 4.3cpl for fuel purchased after 12.01am on Wednesday 30 March 2022.

Further information on the changes to FTC rates for eligible customers can be found at: Budget 2022-23 – Fuel excise fact sheet

Transition arrangements (wholesale customers)

The Government has acknowledged that there will be a period where the embedded excise on fuel purchased by bulk customers will be out-of-sync with Fuel Tax Credit (FTC) rates, potentially creating cash flow consequences for some businesses (e.g. Farming, mining and road transport businesses).

In recognition of these issues, the ATO has put arrangements in place that can be requested to manage any short-term cash flow consequences. Details of these arrangements can be found at:—business/.

To assist with this process, fuel wholesale businesses will be required to track the fuel with the embedded excise and include a notation of the rate on customer invoices.

Transition arrangements (retail customers)

The Government is not proposing any formal arrangements where the embedded excise rate for accumulated stock already in the national retail network exceeds the changed excise rate of 22.1cpl (as at 12.01am on Wednesday 30 March 2022).

Instead, the Treasurer acknowledged that fuel retailers will need to push this higher excise fuel through their retail networks but stated his expectation that the full excise deduction would be passed to Australian motorists within a fortnight.

The pricing strategies used by retailers to manage the transition will be a decision for individual retailers as they respond to changing volumes and market competition, but the ACCC will oversight fuel prices to ensure that the excise reduction is delivered in full (following allowance of reasonable time for replacement of accumulated stocks).

Further information

Should you require any further information in relation to this matter, please contact the ACAPMA Secretariat via