New Zealand has two parallel systems for funding roads: Fuel Excise Duty (FED) is a tax on petrol paid at the pump, while Road User Charges (RUC) is a distance-based licence for diesel, heavy vehicles, and EVs. Both feed into the same fund, but they work very differently. The big news? The government plans to move everyone to RUC eventually, ending the dual system that's been running since 1977.
For nearly 0 years, New Zealand has operated a unique dual system for funding roads. Understanding the difference between Fuel Excise Duty and Road User Charges - and why we're moving toward a single system - is essential for anyone who drives in Aotearoa.
Both FED and RUC feed into the same National Land Transport Fund, but they capture different parts of the fleet.
About 3.4 million vehicles contribute
About 1.1 million vehicles are subject to RUC
National Land Transport Fund
Supports roads, public transport, safety, walking and cycling
The dual system dates back to 1977 and was designed to solve two specific problems that a simple fuel tax couldn't handle.
Between 30-40% of diesel in NZ is used off-road - in farm tractors, fishing boats, forestry equipment, and generators. Taxing diesel at the pump would have taxed farmers for roads they never use.
The solution: Don't tax the fuel, tax the vehicle that uses the road. A tractor on a farm needs no RUC; a truck on the highway does.
Pavement wear rises steeply as axle loads increase. The often-used Fourth Power Law says that doubling an axle load can produce roughly 16 times the pavement wear, although real-world effects vary.
The solution: RUC can allocate costs by weight band and axle configuration in a way a single per-litre fuel rate cannot.
Economic Logic
Indirect proxy: Fuel volume approximates road use
Direct pricing: Distance + Weight = Cost recovery
Who Pays
Mainly light petrol vehicles
Diesel, most light EVs and PHEVs, and most heavy vehicles
Point of Payment
At the pump (invisible to user)
Usually pre-paid licence blocks; approved eRUC is also available
User Experience
Seamless, pay-as-you-go
Requires action: buy blocks, monitor odometer
Cash Flow Impact
Paid gradually as petrol is bought
Usually paid in larger, less frequent licence purchases
Off-Road Usage
Must apply for refunds (cumbersome)
Recorder still counts it; eligible distance can be claimed back
Evasion Risk
Collected upstream through the fuel supply chain
Relies more visibly on accurate recording and timely licensing
Price Transparency
Opaque (buried in pump price)
Transparent (explicit cost per 1,000km)
| Feature | Fuel Excise Duty | Road User Charges |
|---|---|---|
| Economic Logic | Indirect proxy: Fuel volume approximates road use | Direct pricing: Distance + Weight = Cost recovery |
| Who Pays | Mainly light petrol vehicles | Diesel, most light EVs and PHEVs, and most heavy vehicles |
| Point of Payment | At the pump (invisible to user) | Usually pre-paid licence blocks; approved eRUC is also available |
| User Experience | Seamless, pay-as-you-go | Requires action: buy blocks, monitor odometer |
| Cash Flow Impact | Paid gradually as petrol is bought | Usually paid in larger, less frequent licence purchases |
| Off-Road Usage | Must apply for refunds (cumbersome) | Recorder still counts it; eligible distance can be claimed back |
| Evasion Risk | Collected upstream through the fuel supply chain | Relies more visibly on accurate recording and timely licensing |
| Price Transparency | Opaque (buried in pump price) | Transparent (explicit cost per 1,000km) |
FED is an indirect tax on petrol, collected "upstream" from fuel importers and passed down to consumers at the pump. It's invisible and frictionless - you just fill up and go.
Fuel arrives in NZ
Petrol is imported or refined and held in Customs-controlled terminals.
Excise becomes due
When fuel companies move petrol from terminals to tankers for delivery, they pay FED to Customs.
Cost passed to consumer
The 70.024c/litre duty (before GST) is built into the pump price.
Revenue to NLTF
Customs transfers the hypothecated portion to the National Land Transport Fund.
The "petrol proxy" logic
FED worked because fuel consumption roughly correlated with road use. Drive more = burn more petrol = pay more tax. Heavier cars with bigger engines also paid more. It was never perfect, but it was good enough for decades.
RUC is a direct charge for using the road, based on distance traveled and vehicle weight. It requires active participation from the vehicle owner - you must buy licences in advance and track your odometer.
Pre-pay your distance
Buy RUC in 1,000km blocks online, in the NZTA app or from an agent. Most light RUC vehicles pay $76/1,000km.
Display your licence
The RUC label goes on your passenger-side windscreen, showing the maximum odometer reading covered.
Track your distance
Your odometer is your meter. Go past your licensed distance and you're driving illegally.
Top up before you run out
Buy your next block before reaching the limit. Police and WoF inspections check compliance.
$76
Light EV/Diesel per 1,000km
$38
PHEV per 1,000km (reduced)
~$72-$600+
Full schedule, including specialist vehicles
The dual system worked for 50 years, but three converging pressures have made change inevitable.
As petrol vehicles become more efficient, two similar vehicles can contribute very different amounts for travelling the same distance. Ministry advice released in 2026 estimated that, across the fleet, FED was under-recovering about $300 million a year relative to the current light RUC rate.
Before April 2024, light EVs were exempt from RUC and did not pay FED, although owners still paid registration and licensing charges. Bringing light EVs into RUC dealt with that gap, but improving fuel efficiency and a changing fleet still weaken a revenue system tied to petrol consumption.
Under FED, contribution per kilometre depends heavily on fuel economy. That creates winners and losers that do not necessarily reflect distance, vehicle weight or road use. Distributional impacts still matter, but they depend on household travel and vehicle choices rather than a simple income split.
The possible cost flip
If a flat light-vehicle RUC rate replaced FED with no offsetting changes, efficient petrol vehicles would tend to contribute more per kilometre than they do now, while thirsty vehicles could contribute less. But that is an illustration, not a settled price forecast: the government has not decided the rates for the petrol-fleet transition.
The shift to universal RUC is happening in phases. Here's what's confirmed versus what's still proposed.
April 2024
Light EVs now pay $76/1,000km. PHEVs pay reduced rate of $38/1,000km to avoid double-taxation.
July 2026
The Land Transport (Revenue) Amendment Bill passed its second reading on 30 June 2026 but is not yet law. Consultation on supporting regulations closed on 12 June.
2027 decision
Cabinet is expected to consider next steps in 2027 after assessing market readiness and user-friendly payment options. No transition date has been set.
The government is modernising RUC before deciding when to move the petrol fleet. The Bill and proposed regulations are designed to support digital licences, more providers and alternative payment models.
The proposals deliberately avoid locking every light vehicle into one device. They would allow approved providers to use different technologies and service models while meeting standards for accuracy, auditability and privacy. The RFI closed in February 2026 and drew 44 responses; that feedback is now informing advice on next steps.
Check out our other guides on how RUC works, who pays RUC, and the current rate structure. For the latest on the universal RUC transition, see our Timeline page.
