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How the governments fuel tax saviour may be a failure

In the recent Federal budget, the government announced a fuel excise cut to help reduce the soaring price of fuel. It was meant to benefit everyone, but many say it’s lumped more pain on a transport industry that was already hurting.

You can hear the strain in Wendy Fennell’s voice as she touches on the impact the past two years have had on her business.

The director of Fennell Forestry watched the transport industry suffer when the COVID-19 pandemic first placed added stress on truckies and freight operators. Then, when fuel prices soared following the outbreak of the Russia/ Ukraine conflict, Fennell Forestry was sent into another financial tailspin.

It’s been three decades since the business first cut and loaded logs to establish itself as a mainstay in the plantations industry from Mount Gambier to Perth. Despite all this experience, Fennell is crying out for relief from the Federal government for when she next takes her fleet to the service station.

She says, however, that what she’s getting is the opposite of relief. Instead, the Federal government has announced a cut to the fuel excise tax for all motorists filling up at service stations.

“It was a huge disappointment,” Fennell tells ATN. “When I first heard about the fuel excise cut, I quickly realised it wasn’t going to benefit a transport operator at all because we lose the fuel tax credits that used to help pay for the fuel we did use.”

It was the worst possible result for Fennell. In the recent Federal budget handed down by the coalition government, they announced a fuel excise tax reduction that saw the current excise halve from 44 cents per litre of fuel to 22.1. Initially, it sounded like the perfect antidote during a period where money was quickly lost to the rising price of fuel.

But what the Federal government didn’t say on budget night was that they were also scrapping the Fuel Tax Credit (FTC) scheme that transport operators across the country use to help subsidise their fuel costs.

“Following the government’s reduction of the fuel excise tax, it was just another hit to the bottom line,” Fennell says. “There hasn’t been any ability to change our costs because our customers aren’t aware of how it’s affected us and it’s taking a while for truck operators to work out how much it is impacting the industry.”

The removal of the FTC doesn’t sound like a massive impact when the fuel excise tax has been halved. But, Fennell argues, removing the FTC means transport operators barely save when it comes to pumping fuel back into its trucks.

For truck drivers filling up their trucks with fuel, there are three costs involved. The fuel excise tax is included in petrol prices and is a stake that the government receives as taxation. By halving this tax down to 22.1 cents per litre, it means Australians see a drop in fuel prices like many have noticed at service stations in the past week.

The second is the FTC, which is a payment given to transport companies after they buy fuel as a means of partially funding the heavy costs associated with using fuel to deliver across Australia. The third cost is the Road User Charge (RUC), which is a toll that the Federal government enforces on heavy vehicles that use diesel and travel on public roads. The current RUC was increased by 2.5 per cent per litre in 2021-22 to 26.4 cents per litre.

What does this mean? Although many motorists may be praising the Federal government for reducing fuel prices by up to 22.1 cents per litre, the government isn’t footing the bill for this decrease in fuel price.

Wendy Fennell says fuel costs are already hitting the business’s bottom line

Instead, it could be the transport industry who end up paying up to $700 million, as the removal of the FTC for heavy vehicle operators means they only experience a fuel price reduction of four cents per litre. It pales in comparison to the 22.1 cents per litre drop in fuel prices that all other road users have enjoyed.

“It’s been very challenging because there’s already been a lot of price gouging happening at the pump,” Fennell says. “It has been considerably difficult. We’ve been looking at how much fuel we hold and what price we buy it at and we really need the government to re-think this fuel excise cut before we go into our next Business Activity Statement (BAS) return as it won’t be sustainable.”

Fennell Forestry isn’t the only transport business suffering.

All over Australia there are truck drivers and freight companies struggling to find the funds to cover the removal of the FTC after already fighting to cut every cent possible when fuel prices first surpassed the $2 per litre mark.

South Australian Road Transport Association (SARTA) CEO Steve Shearer says he has encountered many different transport companies who will struggle to pay their BAS fees at the end of the next quarter in June.

“A lot of people are just starting to wake up to the problem and plenty still don’t get it,” Shearer tells ATN. “But as soon as you explain the removal of the FTC they instantly understand.”

“They will certainly understand when they do their next BAS payment, which isn’t due until after the election when the next Federal government is in a period where it can’t make major changes.”

In recent years there have been calls to remove the FTC system as it costs the Federal government $8 billion, making it the biggest fossil fuel subsidy in the country. But scrapping it just as the fuel excise tax is reduced means transport companies are paying over 80 per cent of the excise cut bill while the Federal government only pays for around four cents per litre of the fuel reduction motorists see when they now fill up their tanks.

“The Federal government is being cheeky for claiming the cut when they’re making truck operators pay 18 cents of it,” Shearer says. “They’re running around as if they’ve given the community the cut when they haven’t – it’s galling.”

Out of the 22 cent per litre reduction to the fuel excise tax, the removal of the FTC means truck drivers are paying for 18 of the 22 cents per litre reduced. It’s what Shearer describes as a “political sleight of hand” worth $700 million dollars for the transport industry.

But it’s not all doom and gloom. Shearer is working to educate many in the industry about what is happening, with unions across Australia waking up to the news that the fuel excise tax reduction will barely change what transport operators pay at service stations. Transport associations and unions are already warning consumers not to expect price drops, as freight operators can’t afford to pass on price reductions when it is only paying four cents per litre less on fuel than before.

Shearer expects the Federal opposition to oppose the government’s initiative and call for the FTC to be reinstated before transport companies begin folding around the country.

RELATED ARTICLE: Freight operators get no relief on fuel tax

“If we can’t get either party to fix this,” Shearer says, “truck operators won’t be able to pay their BAS payment in June and they’ll go broke.”

“The tax office can then give them as much time as they want to pay them back, but it won’t change much if transport companies don’t have the money.”

They may play different roles in the transport industry, but both Shearer and Fennell agree that the current situation could’ve been easily avoided if the Federal government had consulted with members of the industry before removing the FTC.

Fennell just wants the FTC scheme to return before it’s too late, and Fennell Forestry is forced to make tough decisions.

“We need the government to acknowledge their error because I’m sure their objective wasn’t to lump the transport industry with increased costs,” Fennell says. “They just need to reinstate the fuel tax credit, it’s as simple as that.”

“The government aimed to relieve pressures, but it has actually done the opposite through a very poorly thought-through policy.”

Fennell says she also feels for customers, who won’t experience a drop in costs at supermarkets or stores due to transport operators not being able to pass on any price reductions. She fears that many transport operators may go broke, meaning the supply chain could be in danger of returning to its disrupted state that caused supermarkets to empty during the COVID-19 pandemic.

“When the transport sector has been providing a lot of the solutions to many of the pandemic problems over the past two years, this policy they have dropped is very poor by them,” she says.

For Fennell the solution is simple – keep the fuel excise cut but reinstate the FTC system for transport operators. But she’s not hopeful of receiving financial relief anytime soon. Instead, she’ll just hold tough yet again and hope Fennell Forestry can live through another challenging period.

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