The Government has signalled a major change to how roads are funded, moving away from a petrol excise and toward a per-kilometre road user charge system expected to start in 2027. Transport Minister Chris Bishop said in a public announcement this is "the biggest change to how we fund our roading network in 50 years". The shift will alter how motorists contribute to the National Land Transport Fund and will affect petrol, diesel and electric vehicle owners differently.
How the current system works
Today, petrol drivers pay a fixed excise on each litre purchased that goes into the National Land Transport Fund. The current fuel tax is 70.024 cents per litre, and because fuel tax is subject to GST, that equates to 80.53 cents per litre added to the pump price. Diesel and electric light vehicles do not carry that same per-litre charge. Instead, most light diesel and electric vehicles under 3500 kilograms pay road user charges, which are calculated by distance.
Under the existing RUC structure for light vehicles, drivers pay a flat $76 including GST per 1000 kilometres. For someone who buys road user charges for a typical year of 15,000 kilometres, the charge totals $1140 plus any transaction fees. That is the fixed benchmark the Government has been using while designing the new approach.
What changes with the proposed switch
The key change is replacing the per-litre petrol excise with a per-kilometre charge for petrol vehicles, aligning petrol drivers with diesel and electric vehicles that already pay RUC. Petrol prices at the pump would fall by the amount of the removed fuel tax, because the 80.53 cents per litre currently added would no longer apply. That means petrol will become cheaper at the pump, but drivers will then be billed based on distance travelled rather than fuel consumed.
The Government has not yet published the final RUC rates or the detailed design. Officials have indicated the system could bundle other road-related charges, such as tolls or congestion prices, into a single charging framework, but precise arrangements and whether the current rate will be adjusted remain undecided.
