Industry Issues, Transport Features

What will a fuel tax credit decrease mean for the heavy vehicle industry?

Transport businesses across the country are preparing to tighten their belts and brace for higher costs. ATN sat down with SARTA’s Steve Shearer to talk about what how operators can keep themselves afloat.

It’s going to be a tough month for the road transport industry, that much is certain. From this weekend the fuel tax credit (FTC) scheme for diesel fuel used in eligible trucks on public roads will decrease to 18.9 cents per litre from 20.5 cents per litre. 

The Australian Trucking Association (ATA) has commented on the matter saying the decrease is due to a decision made by Australian transport ministers to increase truck charges by six per cent per year for the next three years. 

As a result, truck drivers and operators will receive a smaller subsidy for their fuel, meaning they will have to pay more for it themselves. 

There will also be an increase to the road user charge (RUC) on diesel, which will rise  from 27.2 cents per litre to 28.8 in 2023-24. 

Following the jump up to 28.8 cents per litre in 2023-24, the road user charge will then rise to 30.5 cents per litre in 2024-25 before finishing at 32.4 cents per litre in 2025-26. 

Steve Shearer of the South Australian Road Transport Association (SARTA) says one cannot understate the significance of these cost rises. 

“Operators should be thinking about these costs increases that are set to come into effect not just in the next two weeks, they should be thinking about business strategies for the next two years. 

“They need to think about every new contract they enter and whether they need to re-negotiate the terms. 

“Any costing mistakes, especially for smaller operators, could lead to a chain of negative events that might eventually ruin them,” Shearer says. 

Fixed term contracts that are common in the transport industry make it difficult for operators to pass on the increased business costs created by new charges such as the increase to the RUC or the decrease to the FTC. 

Shearer says not only are these costs increases counter-productive to the current cost-of-living battle, but they also contribute to a deterioration in commercial standards for businesses. 

“The only way for most businesses to survive this cost increase is to put their freight rates up. And those increased rates end up being paid by the public. 

“Freight rates effect everything, and higher rates will just add more inflationary pressure to the economy. 

SARTA executive director Steve Shearer

“But more importantly, these measures will also likely ruin any company that isn’t able to raise their rates or who are dealing with clients that are not so accommodating. 

“The majority of smaller transport operators in Australia are price takers, and adding more cost pressures to their bottom lines will only serve to make this worse,” Shearer says. 

Shearer says he encourages all transport businesses, especially smaller businesses, to have a meeting with their accountant and figure out the new rates they might need to charge, or new sums of money they will need to come up with, to stay afloat. 

He says the businesses most at risk are those that are not part of any road transport association and that may not be aware of these upcoming cost changes. 

The bigger picture to all these issues, however, is the “price-taker” environment that is hurting so many transport businesses. 

It is an environment where many operators have accepted contract terms to win freight work that cuts margins to the bone – where any work is better than none. 

In this environment, the cost increases are significant because many operators are not adequately protected from unfair business practises, meaning larger companies can get away with pricing them out of the market or forcing unfair terms onto them. 

Shearer says this is why the industry needs a set of enforceable fair standards of business. Something that can protect vulnerable operators but not over-regulate businesses and hurt their competitiveness. 

“We support the principles of fair contracts and timely and appropriate payments. If put in place, this could be a positive for industry – unless they attempt to set minimum rates. 

“The myriad of factors that dictate what rates an operator can charge is far too complicated for any regulator to understand and the government should not attempt to do so. 

“However, there are predatory businesses practises going on that harm small operators and these should be outlawed,” Shearer says. 

He says the other key to improving minimum standards in the transport industry will be adequate government and industry consultation. 

Most road transport bodies agree that setting minimum rates would not be viable and so as long as the federal government listens, Shearer says they shouldn’t risk making the same mistake as the Road Safety Renumeration Tribunal (RSRT) which was abolished in 2016 after industry backlash over its attempt to set minimum rates. 

“We wholeheartedly support concept of minimum standards, provided they are restricted to commercial terms of trade only and do not set freight rates. 

“Minimum standards are matters of commerce, business to business, not a wage rates issue.  

“A minimum rate could be disastrous for the industry. We need to protect the investment and livelihood of the many small businesses who are the backbone of this industry,” Shearer says.

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