The 2026-27 federal budget handed down on Tuesday night has retained Australia’s fuel tax credit scheme for on-road heavy vehicles, sparing log truck operators and the wider forest products freight chain from a Productivity Commission plan to phase out the credits across the next decade. That is according to Australian Trucking Association chair Mark Parry, who thanked Treasurer Jim Chalmers, Transport and Infrastructure Minister Catherine King and Assistant Climate Change Minister Josh Wilson for considering the industry’s response to the commission’s recommendation.
The fuel tax credit system reduces the effective fuel tax rate paid by trucking operators, so they pay based on the cost of heavy vehicles’ use of roads through a road user charge. The government has temporarily set that charge to zero in response to the Iran war, with the charge currently scheduled to return to 32.4 cents per litre on 1 July.
The Productivity Commission had recommended phasing out fuel tax credits for on-road heavy vehicles across 10 years, arguing the scheme blunted decarbonisation price signals across the freight task. Parry rejected the engineering logic behind the proposal, saying no single technology is currently available to replace the diesel engine across the country’s heavy-vehicle fleet.
Trucking operators have already absorbed a 19 per cent rise in fuel tax across the past three years, with the cost of diesel climbing dramatically since the Iran war disrupted Middle East supply chains. The industry is still recovering from those pressures despite the Fair Work Commission’s fuel cost recovery order, which was secured to allow operators to pass through increased input costs.
“Removing fuel tax credits would also hit trucking businesses hard,” Parry said. The ATA chair is now pressing the government to consider extending the zero road user charge for a further three months beyond the scheduled 1 July return.
Wood Central understands the forest products freight chain runs almost entirely on diesel, with log trucks moving sawlogs from coupe to mill, residue trucks shifting woodchips and sawdust to pulp and panel plants, and B-doubles delivering structural timber, particleboard and MDF across the construction supply chain. Removing the fuel tax credit scheme would have raised input costs across each of those movements, with regional sawmilling towns most exposed to the cumulative freight burden.
Parry has pointed to a voucher scheme to cut the up-front cost of electrification or alternative fuel options, a low-carbon fuel standard to encourage the uptake of renewable diesel, and continued support for high-productivity, low-emission vehicles as the more effective decarbonisation path. Those measures would complement the government’s fuel security and resilience plan, which the budget extends to take Australia’s diesel and jet fuel reserves to 50 days.
The road user charge currently sits at zero per litre, with Parry confirming the ATA’s next focus is on whether the temporary reduction will be extended beyond 1 July, when the charge is currently scheduled to return to 32.4 cents per litre across Australia’s heavy-vehicle freight task.
