AAA Tells Henry Review to Abolish Fuel Excise


Australia’s peak motoring organisation, the Australian Automobile Association, has called on the Federal Government to abolish fuel tax and replace it with a universal road user charge.

The road user charge would replace the 38-cents-per-litre excise and a range of other charges such as vehicle registration, with the revenue being used to fund land transport infrastructure.

AAA director of Policy & Research, John Metcalfe, said only 10 of the 38cpl excise went to roads, noting ANOP survey results showing motorists are unhappy with the amount of fuel tax revenue being allocated to the road network.

“A tax on fuel is no longer appropriate – the appropriate tax on all fuels for revenue raising should only be the GST,” Mr Metcalfe said.

“There needs to be a shift towards charging for use and relying less on fixed charges, such as registration, that have a limited relationship to the costs motorists impose when using the road.  These costs include pavement wear and damage, air and noise pollution, and greenhouse gases.

“It is time for road use to be charged in the same way as other essential utilities such as gas, telecommunications, water and electricity where pricing incorporates a modest access charge and a user charge.”

One of the objectives of tax reform in 2000, when the GST was introduced, was to avoid the need to tax a narrow range of commodities, Mr Metcalfe said.  However, fuel tax and other taxes such as stamp duty on vehicle registration and the luxury car tax have remained and add to the cost of motoring.  These additional imposts should be abolished, he emphasised.

The AAA submission also says congestion charging needs to be considered in any reform proposal, but stresses there is a wide range of approaches to tackling congestion that go beyond charging, including public transport expansion.  However, the submission highlights the fact congestion management is properly the responsibility of the states.

Mr Metcalfe also stated that any reform of fuel tax and other motoring taxes, charges and fees should ensure there is no net increase in the overall costs of motoring.

The complete set of recommendations is set out below and the submission can be downloaded from the AAA website


  1. AAA recommends that any reform of fuel tax and other motoring taxes, charges and fees should ensure that there is no net increase in the overall cost of motoring.
  2. AAA recommends that fuel excise should be abolished and that the appropriate tax on all fuels for revenue raising should only be GST, with no distinction for on-road/off-road use.
  3. AAA recommends that there be a direct charge for the use of roads with a clear link between revenue from the charge and expenditure on land transport infrastructure.
  4. AAA recommends that fuel excise be abolished and replaced with a road user charge whereby road users pay for the full social costs of their road use.
  5. AAA recommends that a road user charge have two components: an access charge and a user charge; the access charge would be minimal and reflect the costs of vehicle registration for security and other administrative reasons; and the user charge, in theory, should cover external costs of road use such as pavement wear (damage), crashes, air and noise pollution, greenhouse gases (climate change) and congestion.
  6. AAA recommends that road user charges should be designed to minimise complexity and transaction costs, while also funding infrastructure and reducing external costs.
  7. AAA recommends that in practice, it would be more efficient to address crash costs through direct measures (such as improved vehicle safety, better road infrastructure, pay as you drive insurance directed at creating safer drivers) rather than via a user charge.
  8. AAA recommends that in practice, it would be more efficient to address air and noise pollution costs through direct measures such as improved vehicle emission standards and fuel quality, rather than via a user charge.
  9. AAA recommends that a carbon price be included in a road user charge to address climate change; however, the Government’s proposed response to offset the price impact under emissions trading is the right policy response in the current circumstances with a fuel tax in place and should be seen as a first step towards reforming fuel tax.
  10. AAA recommends that in practice, congestion charging should be a matter for State governments and only introduced after consultation with stakeholders; where it is introduced, charges should only apply where congestion exists and be time and location specific.
  11. AAA recommends the abolition of the Luxury Car Tax.
  12. AAA recommends nationally consistent and minimal registration charges for passenger motor vehicles.
  13. AAA recommends the removal of stamp duty on vehicle registration.



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