Australians will pay more for petrol and diesel following another fuel excise increase from today, August 4, prompting renewed calls for the ‘hidden tax’ to be axed in favour of a national road user charge.

The second increase this year will see the fuel excise on petrol and diesel rise from 50.8 to 51.6 cents per litre, an impost that fuel retailers will be forced to pass on to consumers at the bowser.

Victorian Automobile Chamber of Commerce (VACC) CEO Peter Jones said the latest fuel excise increase was “a predictable six-monthly tax grab” that will hit the pockets of families and businesses already struggling with cost-of-living pressures.

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“This is an indiscriminate tax that disproportionately affects low-income earners and families who rely on their vehicles for work and essential travel,” said Jones in a statement.

The VACC says fuel excise is effectively a hidden tax, because unlike other government charges it’s built into the price displayed at the pump, meaning consumers are often unaware they’re paying this substantial government levy on every litre purchased.

Motorists are then forced to pay the 10 per cent Goods and Services Tax (GST) on top of the fuel excise, effectively making it a tax on a tax.

“It’s a clear double dip by the Federal Government. Motorists are being slugged with excise, then charged GST on that excise. It’s no wonder Australia continues to have some of the highest fuel costs in the developed world,” said Jones.

“Motorists deserve transparency about how their fuel is priced. They need to understand that fuel excise isn’t a static tax – the government increases it every six months, and it’s a significant component of what they pay at the pump.”

Fuel excise increases twice annually in line with the Consumer Price Index (CPI), which rose by 0.7 per cent in the June quarter and 2.1 per cent in the 12 months to June. The August 4 fuel excise increase amounts to about 1.5 per cent.

Fuel tax was originally designed to fund road infrastructure and maintenance, but research by the AAA found only 57 per cent of fuel excise revenue in the decade to the 2022-23 financial year was reinvested in public transport and roads.

Prior to the last federal election the Opposition promised to halve the controversial tax for 12 months, claiming savings of $700 per year for motorists.

That didn’t happen and Australian Government revenue from fuel excise is now expected to increase over the next few years to about $17.7 billion in the 2026-27 financial year – up from $15.71bn in 2023-24.

The Opposition also promised to abolish fines for auto brands that exceed tightening CO2 limits across their model ranges under the New Vehicle Efficiency Standard (NVES), which is designed to accelerate the uptake of zero- and low-emissions vehicles between 2025 and 2029.

But as more Australians transition to hybrids (HEVs), plug-in hybrids (PHEVs) and battery-electric vehicles (EVs), fuel excise revenue is expected to decline significantly, creating pressure on government to develop alternative funding mechanisms for road infrastructure.

The VACC is among a number of auto industry organisations now advocating for a national road user charging system, which it says would “ensure fair contributions from all road users whilst avoiding a patchwork of state-based policies”.

Zero- and low-emissions vehicle charges implemented or planned by states including Victoria, NSW, South Australia and Western Australia to help fund road maintenance have now been scrapped following a 2023 High Court ruling which deemed Victoria’s levy on EV and PHEV drivers as an excise and therefore invalid under the Constitution, which states that only the Commonwealth Parliament (not states or territories) can “impose duties of customs and excise”.