“Just when you thought it was safe to hit the road again and/or go to the pub …”
The tagline for a new horror film? Not quite, but some might consider the fact that the price of petrol and alcohol is about to rise somewhat of a horror story. And many believe the way the increase will be applied is inequitable and unfair.
The upcoming increase is, for many drivers and enjoyers of an occasional drink, not great or unexpected. It will take effect from 5 August and is part of the federal government’s regular indexation on excises. The excise amount is adjusted twice a year on 5 February and 5 August.
‘Excise’ is just another word for tax or duty, usually used in conjunction with the sale of certain regulated goods. Why the word excise is used in the case of fuel and alcohol could be the basis for an entire PhD. Generally, though, the term excise is used to describe an indirect tax that is charged per unit of sale.
How much will the petrol excise increase?
In the case of petrol, that unit is a litre. From 5 August, most drivers will be paying an extra cent per litre of fuel purchased. You may not know that, in Australia, a hefty chunk of your petrol price is actually an excise. That excise is currently 49.6 cents per litre. The 5 August indexation hike, to be announced today, is expected to take that up to 50.6 cents per litre.
In percentage terms, the increase is small (roughly 2 per cent), but the overall excise is certainly not small. If you’re paying $2 per litre, 25 per cent of that is going to the government.
That’s not necessarily a bad thing, if the government is funnelling that money into road and transport infrastructure. But here’s the rub: because they’re not buying fuel, no-one who drives an electric car is contributing to that.
Is this fair? Many road user advocates say no. Michael Bradley, managing director of the Australian Automobile Association, is clear in his opinion. “Because electric vehicle (EV) users do not pay fuel excise, they do not contribute to the cost of building and maintaining roads,” he said. “[This] means a decreasing proportion of owners of cars with internal combustion engines is being asked to bear the entire burden of road funding.”
An NRMA spokeswoman made a similar point. “Fuel excise currently disadvantages those who drive longer distances,” she said.
The other side of the argument is that switching to an electric vehicle helps reduce the fossil fuel contribution to climate change. However, as the NRMA spokeswoman pointed out, this disadvantages “those who cannot afford to upgrade their vehicles to newer, more fuel efficient models”.
It’s an issue the federal government will need to tackle at some stage. For now, though, the twice-yearly indexation will continue.
What about beer and other alcohol?
The price of a beer at the pub will also rise, assuming your local passes on next week’s hike. But if beer is not your ‘poison’, your next glass may or may not cost a little more from next Monday. This is because the federal government’s alcohol excise system is far more complicated than its fuel equivalent. Some would suggest far too complicated.
To give you an idea, the factors upon which alcohol excises depend include:
- whether the drink is served in a licensed venue
- the type of beverage
- the size of the container the beverage is served in
- whether the alcohol is produced commercially
- whether the alcohol is produced from fruit
- the alcohol content.
The last factor – the alcohol content – itself comprises more than a dozen different rates!
Meanwhile, wine qualifies in a category of its own. It’s taxed at a flat 29 per cent of the wholesale price. This means less tax is paid on cheaper wine. At least it’s a bit simpler, right? Well, yes, but then you have to determine what qualifies as ‘wine’, under federal government definitions.
As it stands, fruit and vegetable wine, cider, sake and mead all qualify as wine. But brandy, a spirit distilled from wine, has its own excise rate.
Excise exasperation
It seems to be a needlessly complicated regime. So much so one might wonder if it was conceived by someone unduly influenced by the very substance they’re taxing.
In any case, the liquor industry, like the automobile industry, considers the excise system unfair. It claims the excise is pushing legal alcohol producers out of business and encouraging bootleg production.
Excise on alcohol and fuel certainly forms a tangled web. But the message for Australians is simple. From next week you’ll be paying more for your fuel and alcohol – unless you’re a wine drinker who drives an electric vehicle.
Are Australia’s excise taxes on alcohol and fuel unfair? What changes do you think should be made? Let us know via the comments section below.
Also read: The petrol price conundrum – how to get a better deal
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Petrol and electricity, well, well isn’t that a surprise from this useless government
well said. i and all my friends agree.
You are just a bit late as the Fuel Excise was first introduced in 1901, the rate has been varied from time to time, by both/either side of Politics.
Therefore you can’t really blame the current government.
Got little to do with the present government. Works the same under whatever government.
No one denies that governments need tax/excise to “maintain” our roads, but EV vehicles need to generate their share. They avoid fuel excise and have discounted registration costs.
Isn’t it time for Registration cost to be based on the weight of the vehicle using the road not the antiquated system of “number of cylinders, etc”. Currently a small 4 cylinder runabout cost the same to register as a heavy 4×4 diesel SUV off-roader. Fair, no way!
Since petrol prices directly affect the cost of everything, one would think an intelligent government would reduce petrol excise when they CLAIM they want to address rampant inflation. But not so! And yet fools vote them back in no matter how incompetent they show themselves to be or how much harm they do.
There’s a bit more to the take by the Government than simply the excise. The GST is calculated on the price that includes the Excise. My most recent purchase of petrol was at $2.40/litre. So $0.22c is GST. And of that 0.22c, $0.05c is GST on the Excise.
Whilst the GST did bring down the costs of a great number of consumables (such as fridges and televisions by as much as 17%), the fact that it is on such essentials as power and water, now it probably shouldn’t be on our mobile phone plans as more and more the Government sets things up such that if you wish to access many Government services, you are expected to do so through a mobile phone (remember the check-ins during the height of the Covid scares?).
Our food ingredients are excluded from GST, but the power to preserve and cook them isn’t.