In New Zealand, light vehicle users pay for their use of roads through either fuel excise duty or road user charges (which apply to diesel vehicles and other vehicles not subject to fuel excise duty). All vehicles are also subject to an annual licensing fee, which varies depending on whether the vehicle is petrol or diesel.
This page explains the different charges applicable to different light vehicles, and the reasons for different charging systems.
It is important that you know the differences in the fees charged by government when you are looking to buy a new vehicle.
The Ministry of Transport has developed a calculator that outlines the different charges for light (3.5 tonnes or less) passenger petrol and diesel vehicles. The calculator estimates the total costs and provides a comparison.
Road user charges vs fuel excise duty
What are these charges?
The New Zealand Customs Service charges fuel excise duty when fuel is imported, or when it leaves the place of manufacture (eg the Marsden Point Oil Refinery). The current excise rate on petrol is 63.024 cents per litre.
All vehicles that run on a fuel not subject to fuel excise duty (eg diesel) must have a current road user charges licence. Road user charges are distance based, and can be purchased in multiples of 1,000 kilometres from the NZ Transport Agency and approved road user charges agents. The cost of a licence varies, depending on the type of vehicle and its weight. The current cost for a road user charges licence for light diesel vehicles (weighing 3.5 tonnes or less) is $68 per 1,000 kilometres.
Electric vehicles would be subject to road user charges, but the government has agreed they will remain exempt until at least 31 December 2021.
Where does the government spend the money?
All revenue collected from fuel excise duty and road user charges goes to the National Land Transport Fund (NLTF). The NLTF is used to fund the National Land Transport Programme (NLTP). The NZ Transport Agency administers the NLTP, which is focused on building and maintaining New Zealand’s land transport network.
To find out more about the NLTP, see the NZ Transport Agency’s website(external link).
Where does the money come from?
In 2016/17, the NLTF was made up of:
- $1,896 million from fuel excise duty
- $1,469 million from road user charges
- $223 million from motor vehicle registration and licensing fees.
Note: additional funds sometimes come from revenue from sale of land, additional government contributions, or through cash flow borrowing.
How are road user charges and fuel excise duty set?
Road user charges rates for different vehicle types and weights, as well as the rates of fuel excise duty, are set using a cost allocation model. This model allocates the costs from the NLTP to different vehicles depending on each vehicle’s estimated impact on those costs.
Because heavy vehicles cause more damage to roads and require pavement and roads to be built to a higher standard, the road user charges they are subject to is much higher than those for light vehicles.
For example, a light diesel vehicle - weighing 3.5 tonnes or less - will be subject to road user charges of $68 including GST per 1,000 kilometres. A 44 tonne, 8-axle truck and trailer combination vehicle will be subject to at least $548 including GST per 1,000 kilometres.
Why do all diesel vehicles weighing 3.5 tonnes or less pay the same?
Whether a diesel vehicle is a small 1.5 tonne car, or a large van or SUV with a maximum laden weight of up to 3.5 tonnes, they are subject to the same road user charges. This is because vehicles in this weight range cause very little road damage. The road user charges for vehicles weighing less than 3.5 tonnes are based mainly on costs that are applied to all vehicles. For example, costs such as drainage, signage, and the costs of building new roads that don’t relate to a vehicle’s weight. These costs exist regardless of vehicle weight, so they are applied evenly across all vehicle types and weights.
The costs associated with vehicle weight fall mainly on vehicles weighing more than 6 tonnes. Only 2% (around $1 per 1,000 kilometres) of the road user charges for vehicles weighing 3.5 tonnes or less relate to weight based costs. This is similar for both 1.5 tonne, and 3.5 tonne vehicles, so in order to simplify the vehicle types, there is one rate that applies to all light diesel vehicles.
Why isn’t diesel taxed at the pump like petrol?
An estimated 36 percent of diesel is used off-road. This includes farms, manufacturing, industrial and commercial ventures, and boats. Taxing this would impose an unfair burden onto these sectors. Operating a refund system would be costly and cumbersome to administer and involve compliance costs without any related benefit. A refund system would also potentially be susceptible to fraudulent refund claims.
A 2008/09 review of the road user charges system considered the introduction of a diesel tax carefully, but determined that light road user charges continue to be the most appropriate charging system for light diesel vehicles. You can read more about the review at the link below.
Why am I not rewarded for my diesel vehicle’s fuel efficiency under the road user charges system?
Both these charges are designed as different proxies for recovering the costs of providing the road network, based on either petrol consumption or distance travelled. Neither charge has been designed to incentivise fuel efficiency.
A consequence of fuel excise duty is that a petrol vehicle user's contribution to the NLTF is directly proportional to the amount of fuel they use. This means that the better the fuel efficiency of a petrol vehicle, the smaller contribution to the NLTF they will make. However, the purpose of the fuel excise duty system is not to incentivise fuel efficiency; it is to charge petrol vehicle users for their use of roads, and excise duty is simply a proxy for distance travelled.
The road user charges system charges people directly for their road use based on distance travelled.
Ideally, to ensure fair charging, petrol vehicles would be subject to road user charges as well. However, the current excise duty system is relatively cheap to administer compared to road user charges, so this is unlikely to occur until technology improvements make road user charges inexpensive to administer.
Am I still better off driving a diesel car?
The total cost depends on the fuel economy for the different vehicles you are comparing. Use our calculator to help you compare costs.
Based on the average fuel economy of petrol vehicles (The Ministry estimates that petrol vehicles currently average 9.5 litres per 100 kilometres), a petrol vehicle will pay slightly more fuel excise duty than an equivalent diesel vehicle will pay in road user charges.
The benefits of running a diesel vehicle increase further once their superior fuel economy is taken into account. Fuel consumption tests generally give results between 20 and 30 percent better for a diesel engine car compared to the same model with a petrol engine.
Annual Vehicle Licensing fees (“rego”)
What is an Annual Vehicle Licence?
Every vehicle registered to operate on New Zealand roads requires an Annual Vehicle Licence. This is the licence label that is displayed on the front left of the windscreen, and is sometimes called the registration or “rego”.
What are the Annual Vehicle Licence fees for?
There are a number of fees that make up the total Annual Vehicle Licence fee.
- $43.50 from each fee goes to the National Land Transport Fund (along with fuel excise duty and road user charges) to fund the development and operation of the land transport network.
- Each fee includes an Accident Compensation Corporation (ACC) levy, depending on the vehicle type and fuel type.
- The remainder of the fee is made up of GST, administration fees, and other fees (such as the cost of the label itself).
Why is the Annual Vehicle Licence fee more expensive for non-petrol vehicles and for goods service vehicles?
The difference in Annual Vehicle Licence fees between equivalent vehicles with different fuels is because there is also a 6.9 cents per litre ACC levy on every litre of petrol, which does not apply to diesel or road user charges.
ACC levies are set so that a diesel vehicle travelling the average distance per year is subject to the same ACC levies per year as a petrol vehicle. However, this is an average, and some vehicles will be subject to more, and some less, depending on how much they travel. The calculator available at the top of this page will help you calculate how much you will pay for the two different fuel types for light passenger vehicles.
ACC levies also vary depending on vehicle type. Goods service vehicles pay more because they have a higher risk rating, and drive greater distances than standard cars. This is similar to the way the ACC levies for motorcycles are higher, due to the high accident rate and cost of motorcycle accidents.