The Albanese administration has been reportedly asked to cut in half the $8 billion in fuel tax credits it provides to semi-trailers, mining trucks, and other heavy vehicles each year, based on new research, which finds that reforms are critical for budget recovery and reaching emissions targets.

According to a Grattan Institute report released on Monday, fuel tax credits have been chipping away an ever-growing portion of fuel tax earnings, with just half of the present spent amount justified in social or economic terms.

As per the research, the fuel tax credit plan is a political handout that mostly benefits large businesses.

Apparently, the fuel tax in Australia is 47.7 cents per liter, although heavy machinery and trucks that solely travel off-road are exempt from paying any fuel taxes.

It has been reported that the government reimburses this through fuel tax credits when the tax is factored into the price of petrol at the bowser.

Semi-trailers, buses, as well as B-doubles that weigh more than 4.5 tonnes only need to pay a lower rate and get a 20.5-cent partial credit.

According to the Grattan research, the issue of rising government expenditure on fuel tax credits has grown more important over the years.

Fuel tax credits were introduced 40 years ago, but it was not until 1999 that more liberal regulations for larger on-road automobiles were put into place.

According to the analysis, the credits lowered gross gasoline tax income by 30% ten years ago, however now only account for roughly 40% of it.

The report states that the on-road fuel tax rate must extend to all fuel used on-road, particularly for fuel used for driving auxiliary equipment.

In addition, the report suggests that trucks used in mining operations, which are off-road heavy cars and trucks that do not harm public roads, continue to be eligible for some fuel tax credit, albeit at a lower rate than is currently the case, to represent the carbon dioxide emissions and other harm they cause to the society as a whole.

Source credit: https://www.theguardian.com/australia-news/2023/feb/05/labor-urged-to-halve-8bn-a-year-in-fuel-tax-credits-for-trucks-and-heavy-vehicles