Fuel excise halved: fuel tax credits (FTC) implications for businesses

The measures include a three-month halving of fuel excise on petrol and diesel, and a temporary reduction of the Road User Charge (RUC) to zero, both effective from 1 April to 30 June 2026. These changes have direct implications for pump pricing and for businesses that claim Fuel Tax Credits (FTC).

What is changing?

From 1 April 2026, for a three month period ending 30 June 2026: 

• Fuel excise on petrol and diesel is halved, reducing the excise component by 26.3 cents per litre, from 52.6 cpl to 26.3 cpl 
• The Road User Charge, which is currently 32.4 cpl, will be reduced to zero for the same period 

Fuel prices may not adjust immediately at all sites, depending on when retailers receive new fuel stock purchased under the lower excise rate. However, FTC rates will change for all fuel acquired from 1 April 2026, regardless of when retail prices adjust. 

What this means for fuel tax credits

FTCs provide a credit for fuel tax included in the price of fuel used in eligible business activities. Rates vary depending on the activity and vehicle type.

There are typically two relevant FTC rates:

• Fuel used in heavy vehicles (greater than 4.5 tonnes GVM) travelling on public roads, which prior to 1 April was 20.2 cpl, being the excise rate of 52.6 cpl less the RUC of 32.4 cpl.
• Fuel used in all other eligible business activities, including off road travel, auxiliary equipment, and plant and machinery, which was claimable at the full excise rate.

The temporary excise reduction and temporary removal of the RUC result in different outcomes across common user groups, as summarised below.

Important: Fuel used in light vehicles of 4.5 tonnes GVM or less travelling on public roads remains ineligible for Fuel Tax Credits. 

Practical considerations for businesses

• Update FTC calculation rates from 1 April 2026 to reflect the temporary excise reduction and the temporary removal of the RUC for heavy vehicles travelling on public roads.
• Apply FTC rates based on the fuel acquisition date, consistent with ATO rate tables.
• Review fuel apportionment and record keeping ensuring fuel is correctly categorised between on road heavy vehicle use, off road or auxiliary use, and light vehicles.
• Plan for the end of the relief period on 30 June 2026, noting the measures are temporary and rates are expected to revert unless extended.
• Expect timing differences at the bowser, as retail prices may lag while service stations sell fuel acquired under previous excise settings.

Federal Budget implications

While intended as temporary cost‑of‑living and industry relief, the fuel excise and RUC changes are likely to have a short‑term impact on Federal revenue through lower excise collections and increased Fuel Tax Credit outflows. These measures may add pressure to the upcoming Federal Budget and prompt closer scrutiny of how temporary relief is funded, particularly if there is demand to extend the settings beyond 30 June 2026.

Need help?

If you would like support updating FTC calculations, reviewing eligibility and substantiation, or assessing cash flow impacts during the three month period, please contact Grant Thornton.

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