The fuel excise cut of 22.1 cents per litre continues through 2025, providing ongoing relief at the bowser. Combined with market competition, this saves the average household $720 annually on petrol and diesel purchases.
Current excise rate
Australia's fuel excise tax currently sits at 44.2 cents per litre as of February 2025, following the restoration of the full rate after the temporary 2022 cut expired. This rate applies to both petrol and diesel, making it one of the most significant components of pump prices after the wholesale fuel cost.
The excise rate is indexed twice yearly in February and August, adjusting in line with the Consumer Price Index (CPI). This automatic indexation means the rate gradually increases over time to maintain its real value, typically adding around 0.8 cents per litre every six months.
Fuel excise rate over time
The current rate structure applies differently to various fuel types:
- Petrol: 44.2¢ per litre
- Diesel: 44.2¢ per litre
- LPG: Lower rate at approximately 14¢ per litre
- Aviation fuel: Different rates depending on use (commercial vs private)
Importantly, GST is calculated after excise is added, meaning consumers pay 10% GST on both the wholesale fuel price and the excise component. This compounds the effective tax burden on fuel purchases.
Past & proposed cuts
The most recent fuel excise cut occurred in March 2022, when the Morrison Government temporarily halved the rate from 44.2¢ to 22.1¢ per litre in response to rising fuel prices following Russia's invasion of Ukraine. This cut saved motorists approximately $11 on a 50-litre tank fill.
The temporary cut lasted six months, automatically expiring in September 2022 when the full rate was restored. The Albanese Government chose not to extend the cut, citing budget pressures and the need to fund infrastructure projects that rely on fuel excise revenue.
Current political landscape
As of 2025, there is no federal government proposal to cut fuel excise. However, political pressure remains:
- Crossbench pressure: Several independent MPs continue to advocate for a 10¢ per litre excise holiday
- Opposition position: The Coalition has not committed to future cuts but remains open to the possibility
- Budget constraints: Fuel excise generates approximately $11 billion annually in federal revenue
- Infrastructure funding: Excise revenue specifically funds road infrastructure through hypothecation arrangements
State alternatives
While states cannot directly cut fuel excise (a federal tax), some have implemented alternative relief measures:
- Registration fee waivers: Some states have reduced or waived vehicle registration fees
- Public transport subsidies: Enhanced public transport funding to reduce car dependency
- Regional fuel subsidies: Targeted support for remote areas through existing schemes
Petrol price breakdown (May 2025)
Typical breakdown of $1.80 per litre petrol price
Price outlook
Fuel price forecasts for 2025 suggest continued pressure on household budgets, with several factors influencing pump prices beyond excise policy:
International factors
- Oil price forecasts: Brent crude oil predicted to trade between US$85-90 per barrel through 2025
- Refining margins: Global refining capacity constraints continue to pressure wholesale prices
- Currency impacts: Australian dollar strength against the US dollar affects import costs
- Geopolitical risks: Ongoing tensions in key oil-producing regions maintain price volatility
Domestic considerations
Several Australia-specific factors affect fuel pricing:
- Refinery capacity: Limited domestic refining means Australia relies heavily on imports
- Supply chain costs: Distribution and storage costs have increased post-COVID
- Competition levels: Market concentration affects pricing in some regional areas
- Seasonal patterns: Summer driving periods typically see higher demand and prices
Indexation schedule
Fuel excise will continue to increase through automatic indexation:
- February 2025: Current rate of 44.2¢ per litre
- August 2025: Expected increase of approximately 0.8¢ per litre
- February 2026: Further CPI-based adjustment
Remote area relief
Existing programs provide fuel cost relief for remote communities:
- Fuel Tax Credit (FTC): Partial excise refund for business and agricultural use
- Remote Area Allowance: Additional support for government employees in remote locations
- Indigenous community programs: Specific fuel subsidies for remote Aboriginal communities
Key Facts
While fuel excise cuts provide immediate relief at the pump, they come with significant budget implications and reduce funding for road infrastructure. The 2022 temporary cut demonstrated both the potential benefits for motorists and the fiscal challenges for government. Any future excise reduction would require new legislation and careful consideration of competing budget priorities. In the meantime, motorists can expect continued indexation to gradually increase the excise component of fuel prices over time.
For additional cost-of-living relief, consider the Energy Bill Relief Rebate for electricity bill credits, and if you're considering an electric vehicle, explore EV rebates and incentives available in your state.