Why does there need to be an increase in charges?

In June 2018, the government announced plans for three annual petrol excise duty (PED) increases of 3.5 cents per litre, with equivalent increases in road user charges (RUC) rates. These increases are necessary to ensure that there will be enough revenue available in the National Land Transport Fund (NLTF) to make the important investments in our transport system that were signalled in the Government Policy Statement on land transport 2018 (GPS 2018)

The increases on 30 September 2018 (for PED) and 1 October 2018 (for RUC) are the first round of these increases. Further increases are intended to take effect on 1 July 2019 and 1 July 2020.

What will the increases fund?

Among other things, the increases will fund increased investment in safety upgrades, public transport, walking and cycling projects and regional roads. Funding ranges for different types of activity are laid out in GPS 2018. You can read more about GPS 2018 here.

When will the increases take effect?

The increased PED rate will take effect from 30 September 2018. Increased RUC rates will take effect from 1 October 2018.

How much is PED being increased on 30 September 2018?

PED will increase by 3.5 cents per litre on 30 September 2018. This is a 5.9 percent increase in the rate. Excluding GST, the new PED rate will be 63.024 cents per litre. Including GST, the new PED rate will be 72.478 cents per litre.

The following table provides an indication of the direct weekly impact of the PED increase on households with different incomes, including GST.

Household income

Estimated average weekly increase

 

2018

2020

Average

 $     0.83

 $     2.50

Decile 1

 $     0.41

 $     1.24

Decile 2

 $     0.39

 $     1.18

Decile 3

 $     0.57

 $     1.71

Decile 4

 $     0.71

 $     2.14

Decile 5

 $     0.88

 $     2.65

Decile 6

 $     0.79

 $     2.37

Decile 7

 $     1.07

 $     3.21

Decile 8

 $     1.11

 $     3.34

Decile 9

 $     1.31

 $     3.93

Decile 10

 $     1.43

 $     4.29

What are the actual RUC increases?

Total RUC revenue will increase by 5.9 percent, equivalent to the percentage increase in PED that is being implemented at the same time. The exact increases to RUC will vary for different vehicle types according to their size, weight and axle configuration.

RUC for light diesel vehicles (up to 3.5 tonnes) will increase by around 9.7 percent, while most small and medium heavy vehicles of more than 3.5 tonnes and up to 12 tonnes will experience increases of between zero and 10 percent. Some heavier vehicles will increase by up to 10 percent, but most heavy vehicle rates are unaffected.

For a diesel car, the increase in RUC adds approximately $50 to the cost of driving 10,000 kilometres, or 0.5 cents more per kilometre.

Once Cabinet has approved the Order in Council enabling the new rates, a full list of the new rates will be available on the NZ Transport Agency website (www.nzta.govt.nz) - or you can ring the help-desk at the RUC Contact Centre on 0800 655 644 Monday to Friday 8am to 6pm.

What will this mean for operators of heavy vehicles?

RUC represents about 10 percent of the total costs for road transport operators (the largest costs are wages and depreciation). For many heavy vehicle types, there is no increase in RUC rates for 2018. This is because the cost allocation model (referenced below) suggests that current RUC rates are recovering from these vehicle types at an appropriate level.

What happens to existing RUC licences when charges increase on 1 October?

If the RUC rate for your heavy vehicle is increasing, your RUC license will expire one month after the date of the increase. If the rate for your vehicle is not increasing, your license will not expire. RUC licences for light vehicles (3.5 tonnes and under) will not expire.

Will heavy vehicle operators lose money when their licences expire?

No. Heavy vehicle operators will receive an automatic refund in the form of a credit on any unused portion of the RUC licence when they purchase their new licence.

What will happen if I do not purchase a new RUC licence for my heavy vehicle within a month?

If you do not purchase a new RUC licence within a month, your licence will be invalid and you may be issued an infringement notice.

How can I be sure this increase in RUC is fair?

The 5.9 percent increase in total RUC revenue is the same proportion as the increase in PED.

The variation in increases for different weights and types of vehicles is due to differences in the amounts of costs attributed to different types of vehicle by the Ministry of Transport’s cost allocation model.

Some diesel users will pay more, and some less, in RUC, than equivalent petrol vehicles pay PED. This is the unavoidable result of having two charging systems, one based on distance travelled and the other on fuel consumed.

What is the cost allocation model?

The cost allocation model is a mechanism designed to allocate the costs incurred under the National Land Transport Programme in a given year between vehicles of different types, according to the differences in the costs they generate for the road network. It calculates RUC rates that would recover those costs.

Charges can not be a perfect reflection of the model, as that would require excessive fluctuation in rates of RUC and PED. The aim is to ensure increases in charges are distributed fairly between users, and RUC rates move closer to those indicated by the model over time.  

How will RUC licence holders know that charges are increasing?

As a result of an amendment to the Road User Charges Act 2012, the government is required to give six weeks notice of increases to RUC. Notification is published in the Gazette. You can see a copy of the regulations by visiting www.legislation.govt.nz and searching for the Road User Charges (Rates) Amendment Regulations 2018.

Additionally, information about the changes will be available on the Ministry of Transport website, and the NZ Transport Agency website.