House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

Glossary

This Explanatory Memorandum uses the following abbreviations and acronyms.

General outline and financial impact

Schedule 1 - Fuel duty reduction

Outline

Schedule 1 to the Bill amends the Excise Tariff Act and the Customs Tariff Act respectively to temporarily reduce the excise duty rates and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products.

These changes assist in easing some of the impact of recent fuel price increases resulting from the conflict in the Middle East by providing a temporary reduction in fuel excise and customs duties.

Date of effect

Schedule 1 to the Bill has effect from 1 April 2026.

Proposal announced

The reduction in fuel duty contained in the Bill was announced by the Prime Minister on 30 March 2026.

Financial impact

Schedule 1 to the Bill is estimated to decrease the underlying cash balance by approximately $1.9 billion over the forward estimates period.

Human rights implications

Schedule 1 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 4.

Compliance cost impact

This measure is expected to have a low impact on compliance costs.

Schedule 2 – Further fuel duty reduction

Outline

Schedule 2 to the Bill amends the Excise Tariff Act and the Customs Tariff Act to provide the Treasurer with the power to determine a percentage of fuel duty rate lower than the 50 per cent that otherwise applies between 1 April 2026 and 30 June 2026. This benefits users of fuel products.

Date of effect

Schedule 2 to the Bill has effect from 1 April 2026.

Proposal announced

The reduction in fuel duty contained in the Bill was announced by the Prime Minister on 30 March 2026.

Financial impact

Schedule 2 to the Bill has no impact on underlying cash over the forward estimates period.

Human rights implications

Schedule 2 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 4.

Compliance cost impact

This measure is expected to have a low impact on compliance costs.

Schedule 3 – Amendments relating to fuel tax credits

Outline

Schedule 3 to the Bill amends the Fuel Tax Act to provide the Transport Minister with the power, on a temporary basis beginning on the day after the commencement of the Bill and ceasing on 30 June 2027, to vary the rate of the road user charge for a financial year beginning on 1 July 2025 or 1 July 2026. The Schedule removes existing restrictions on the use of the determination making power by the Transport Minister.

Date of effect

Schedule 3 to the Bill has effect from 1 April 2026.

Proposal announced

The amendments to the road user charge were announced by the Prime Minister on 30 March 2026.

Financial impact

Schedule 3 to the Bill has no impact on underlying cash over the forward estimates period.

Human rights implications

Schedule 3 to the Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 4.

Compliance cost impact

This measure is expected to have a low impact on compliance costs.

Chapter 1: Fuel duty reduction

Outline of chapter

1.1 Schedule 1 to the Bill amends the Excise Tariff Act and the Customs Tariff Act to temporarily reduce the excise duty rates and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products.

Context of amendments

1.2 On 30 March 2026, the Government announced that it would introduce legislation to Parliament to assist to ease pressures on fuel prices in Australia, including by halving the rate of excise and excise-equivalent customs duty on fuel.

1.3 These changes assist in easing some of the impact of recent fuel price increases resulting from the conflict in the Middle East by providing a temporary reduction in fuel excise and customs duties.

Summary of new law

1.4 Schedule 1 to the Bill amends the Excise Tariff Act and the Customs Tariff Act to temporarily reduce the excise and excise-equivalent customs duty rates applying to fuels, including petrol and diesel and similar petroleum-based products:

•

From 1 April 2026, the excise and excise-equivalent customs duty rates on fuels, including petrol and diesel and similar petroleum-based products manufactured or produced in Australia or imported into Australia is reduced by 50 per cent for a period of three months until 30 June 2026.

•

From 1 July 2026, the excise and excise-equivalent customs duty rates for these goods automatically return to the rates that would otherwise have applied on this date as if there had not been a temporary reduction in fuel excise and excise-equivalent customs duty rates.

Comparison of key features of new law and current law

Table 1.1 Comparison of new law and current law

Detailed explanation of new law

1.5 From 1 April 2026, the excise and excise-equivalent customs duty rates for fuel products, including petrol and diesel are reduced by 50 per cent from the rate applying as a consequence of the February 2026 indexation day (see paragraph 1.13 below for the reduced rates) as at 31 March 2026.

1.6 From 1 July 2026, the excise and excise-equivalent customs duty rates for fuel products, including petrol and diesel and similar petroleum-based products, return to the February 2026 rate.

Temporary reduction in excise and excise-equivalent customs duty rates from 1 April 2026

1.7 From 1 April 2026, the fuel excise and excise-equivalent customs duty rates are reduced by 50 per cent from the rates that have applied since February 2026 indexation day.

1.8 This is achieved for fuel excise in the Excise Tariff Act by repealing subsections 6K(5) to (8) and substituting subsection 6K(6), which provides that the rate reduction period means the period beginning on 1 April 2026 and ending on 30 June 2026. The term rate reduction period is central to subsections 6K(1) to (3) of the Excise Tariff Act, which establish the circumstances for a temporary rate reduction in fuel excise.

1.9 For completeness, subsection 6K(6) also provides the definition CPI indexed fuel rate.

1.10 Due to the abovementioned amendments, the note to subsection 6K(1) is also amended to reflect that the definition is now in subsection 6K(6).

[Schedule 1, items 3 and 4, subsections 6K(1) (note) and 6K(6) of the Excise Tariff Act]

1.11 The equivalent changes are made to the Customs Tariff Act to achieve the temporary reduction in the excise-equivalent customs duty rate. Subsections 19AABA(4) to (7) are repealed and subsection 19AABA(4) is substituted. This subsection sets out the definition for rate reduction period, which is the same as the definition outlined in paragraph 1.8 above. Namely, the period beginning on 1 April 2026 and ending on 30 June 2026 (inclusive).

1.12 Similarly, the note to subsection 19AABA(1) is amended to reflect that the definitions provision is now in subsection 19AABA(4).

[Schedule 1, items 1 and 2, subsections 19AABA(1) (note) and 19AABA(4) of the Customs Tariff Act]

1.13 As a consequence of these amendments, from 1 April 2026 the excise and excise-equivalent customs duty rates applying for petrol and diesel are $0.263 per litre. Reductions also apply to other fuel duty rates for other fuel products.

1.14 The reduced fuel excise rates are included in the definition of CPI indexed fuel rate in subsection 6K(6) of the Excise Tariff Act. This specifies that the reduced fuel excise rates are the ones covered in paragraphs (b) and (c) of the existing definition of CPI indexed rate in subsection 6A(10) of the Excise Tariff Act.

1.15 The customs tariff subheadings for fuel products that the reduced fuel duty rates apply to are provided in section 19AAC of the Customs Tariff Act.

1.16 The current fuel excise and excise-equivalent customs duty rates are available from the Australian Taxation Office and Australian Border Force websites.

1.17 Reduced excise duty rates apply to fuels, including petrol and diesel and similar petroleum-based products that were manufactured or produced in Australia:

•

between the period beginning on 1 April 2026 and ending on 30 June 2026 (inclusive); and

•

Before 1 April 2026, if:

-

on 1 April 2026, the goods were subject to the CEO's control or were in the stock, custody or possession of, or belonged to, a manufacturer or producer of goods; and

-

no duty of excise had been paid on the goods before 1 April 2026.

1.18 Reduced excise-equivalent customs duty rates apply to fuels, including petrol and diesel and similar petroleum-based products:

•

imported into Australia between the period beginning on 1 April 2026 and ending on 30 June 2026 (inclusive); and

•

imported into Australia before 1 April 2026, where the time for working out the rate of the import duty on the goods had not occurred before 1 April 2026.

1.19 The requirements for when the duty rate for imported goods must be paid and worked out are set out in section 132AA of the Customs Act 1901.

1.20 The reduced excise and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products, are rounded to three decimal places.

Restoration of excise and excise-equivalent customs duty rates from 1 July 2026

1.21 From 1 July 2026, the excise and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products automatically return to the rates that would have applied had the rates not been reduced.

1.22 This is achieved through the new definition for rate reduction period, which means the period beginning on 1 April 2026 and ending on 30 June 2026 inclusive.

[Schedule 1, item 4, subsection 6K(6) of the Excise Tariff Act; and Schedule 1, item 2, subsection 19AABA(4) of the Customs Tariff Act]

1.23 This means that from 1 July 2026, the excise and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products, return to the rates that applied on the February 2026 indexation day, which is indexation at the CPI indexed rate using the February 2026 indexation factor. The effect is that excise and excise-equivalent customs duty rates return to where they would have been but for the reduction in rates during the rate reduction period.

1.24 These full rates will continue to be subject to indexation twice each year (in February and August) on an ongoing basis.

1.25 The restoration of the excise duty rates applies to fuels, including petrol and diesel and similar petroleum-based products, manufactured or produced in Australia:

•

on or after 1 July 2026; or

•

before 1 July 2026 date if:

-

on 1 July 2026, the goods were subject to the CEO's control or were in the stock, custody or possession of, or belonged to, a manufacturer or producer of goods; and

-

no duty of excise had been paid on the goods before 1 July 2026.

1.26 The restoration of the excise-equivalent customs duty rates applies to fuels, including petrol and diesel and similar petroleum-based products:

•

imported into Australia on or after 1 July 2026; and

•

imported into Australia before 1 July 2026, where the time for working out the rate of import duty on the goods had not occurred before 1 July 2026.

Commencement, application, and transitional provisions

Commencement

1.27 The amendments to the Excise Tariff Act and the Customs Tariff Act commence on the day the amendments receive Royal Assent. [Clause 2 of the Bill]

Application provisions

Application date - reduction and restoration of excise and customs duties

1.28 The amendments to reduce fuel excise and excise-equivalent customs duty rates apply to goods that are:

•

manufactured or produced in Australia on or after 1 April 2026; or

•

manufactured or produced in Australia prior to 1 April 2026 that were subject to the Commissioner's control or were held or belonged to a manufacturer or producer of the goods and no duty of excise had been paid on the goods before 1 April 2026; or

•

imported into Australia on or after 1 April 2026; or

•

imported before 1 April 2026 where the time for working out the rate of import duty for the goods had not occurred prior to 1 April 2026.

1.29 The amendments also restore the fuel excise and excise-equivalent customs duty rates to the rates that would otherwise have applied if the amendments had not been made, apply to goods that are:

•

manufactured or produced in Australia on or after 1 July 2026;

•

manufactured or produced in Australia prior to 1 July 2026 that were subject to the Commissioner's control or were held or belonged to a manufacturer or producer of the goods and no duty of excise had been paid on the goods before 1 July 2026;

•

imported into Australia on or after 1 July 2026; or

•

imported before 1 July 2026 where the time for working out the rate of import duty for the goods had not occurred prior to 1 July 2026.

1.30 The reduction and restoration of the excise and customs duties is achieved through the definition of rate reduction period, which provides that the rate reduction period means the period beginning on 1 April 2026 and ending on 30 June 2026 inclusive.

[Schedule 1, item 4, subsection 6K(6) of the Excise Tariff Act; and Schedule 1, item 2, subsection 19AABA(4) of the Customs Tariff Act]

1.31 Depending on when the Bill receives Royal Assent, the amendments may apply retrospectively. However, the reduced duty rates that apply from 1 April 2026 are wholly beneficial for affected manufacturers, producers, importers and users of fuels, including petrol and diesel and similar petroleum-based products as the Bills result in the temporary reduction in the rates of duty payable.

Chapter 2: Further fuel duty reduction

Outline of chapter

2.1 Schedule 2 to the Bill amends the Excise Tariff Act and the Customs Tariff Act to provide the Treasurer with the power to determine a lower percentage of fuel duty rate than the 50 per cent that otherwise applies during the period 1 April 2026 to 30 June 2026. A lower percentage benefits users of fuel products.

Context of amendments

2.2 On 30 March 2026, the Government announced that it would introduce legislation to Parliament to assist to ease pressures on fuel prices in Australia, including by halving the rate of excise and excise-equivalent customs duty on fuel.

2.3 These changes assist in easing some of the impact of recent fuel price increases resulting from the conflict in the Middle East by providing a temporary reduction in fuel excise and customs duties.

Summary of new law

2.4 Schedule 2 to the Bill amends the Excise Tariff Act and Customs Tariff Act to provide that the temporary reduction in CPI indexed fuel rates is 50 per cent during the rate reduction period unless the Treasurer has determined a lower percentage applies. A lower percentage benefits the users of fuel products.

Detailed explanation of new law

2.5 From commencement, the Treasurer will have the power to determine a greater percentage reduction to the CPI indexed fuel rate than the 50 per cent that otherwise applies during the rate reduction period. This is achieved by determining a percentage amount lower than 50 per cent that applies against the full rate of duty.

2.6 This is provided for in relation to fuel excise in the Excise Tariff Act by repealing subsection 6K(1) and substituting a new subsection 6K(1) which provides that the CPI indexed fuel rate during the rate reduction period is 50 per cent unless the Treasurer has determined a lower percentage.

2.7 A new subsection 6K(5) provides that the Treasurer may, by legislative instrument, determine a percentage for purposes of determining a lower percentage for the CPI indexed fuel rate during the rate reduction period.

[Schedule 2, items 2 and 3, subsections 6K(1) and (5) of the Excise Tariff Act]

2.8 To ensure that excise-equivalent customs duty rates under the Customs Tariff Act remain consistent with the reductions determined by the Treasurer to the CPI indexed fuel rate under the excise law, an equivalent power is included in the Customs Tariff Act. This is achieved by amending subsection 19AABA(1) of the Customs Tariff Act to provide that the percentage of the fuel duty rate is 50 per cent unless the Treasurer has determined a lower percentage under subsection 6K(5) of the Excise Tariff Act, in which case it is the lower percentage.

[Schedule 2, item 1, subsection 19AABA(1) of the Customs Tariff Act]

2.9 To illustrate, during a rate reduction period, the CPI indexed fuel rate is ordinarily 50 per cent. However, if the Treasurer determines a lower percentage of 45 per cent, the CPI indexed fuel rate would be 45 per cent which benefits users of fuel products as it provides an overall 55 per cent reduction in the duty rate.

Commencement

2.10 The amendments to the Excise Tariff Act and the Customs Tariff Act commence on the day the amendments receive Royal Assent. [Clause 2 of the Bill]

Chapter 3: Amendments relating to fuel tax credits

Outline of chapter

3.1 Schedule 3 to the Bill amends the Fuel Tax Act to provide the Transport Minister with the power, on a temporary basis beginning on the day after the commencement of the Bill and ceasing on 30 June 2027, to vary the rate of the road user charge for a financial year beginning on 1 July 2025 or 1 July 2026. The Schedule removes existing restrictions on the use of the determination making power by the Transport Minister.

Context of amendments

3.2 The Government announced on 30 March 2026 that it would introduce legislation to Parliament to ease pressures on fuel prices in Australia, including by reducing the rate of road user charge that applies to heavy vehicles to zero for three months beginning on 1 April 2026 and deferring the next scheduled increase in the rate of road user charge by six months.

3.3 These amendments are part of a suite of legislative amendments that seek to ease some of the impact of recent fuel price increases resulting from the conflict in the Middle East.

Summary of new law

3.4 Schedule 3 to the Bill amends the Fuel Tax Act to provide the Transport Minister with the power to determine an increase to the rate of the road user charge for the period 1 July 2025 to 30 June 2027 (inclusive) during the period 1 April 2026 to 30 June 2027 (inclusive) without the restrictions on that power provided in subsections 43-10(9), (10), (11) and (12). Among other things, these amendments allow the Transport Minister to decrease the road user charge without engaging in public consultation and make more than one determination per financial year.

Comparison of key features of new law and current law

Table 3.1 Comparison of new law and current law

Detailed explanation of new law

3.5 From commencement of this Schedule until 30 June 2027, the Transport Minister will be able to determine an increase to the rate of road user charge for the period 1 July 2025 to 30 June 2027 (inclusive) without the restrictions that ordinarily apply to the making of such a determination. Specifically, the Transport Minister will be able to make more than one determination to increase the rate of road user charge in respect of a class of taxable fuel in a financial year and do so without:

•

undertaking public consultation on the proposed increase rate of road user charge for a period of at least 60 days; and

•

the restriction on applying a method for indexing the charge.

[Schedule 3, item 1, subsection 43-10(13) of the Fuel Tax Act 2006]

3.6 These amendments are necessary to provide flexibility to respond to the effects on fuel prices resulting from the conflict in the Middle East.

Commencement

3.7 Schedule 3 to the Bill commences on the day after Royal Assent.

Chapter 4: Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Treasury Laws Amendment (Fuel Excise Relief) Bill 2026

Schedule 1: Fuel duty reduction

Overview

4.1 Schedule 1 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

4.2 The amendments made by Schedule 1 to the Bill assist in easing some of the impact of recent the fuel price increases resulting from the conflict in the Middle East by providing a temporary reduction in fuel excise and customs duties.

4.3 Schedule 1 to the Bill amends the Excise Tariff Act and the Customs Tariff Act respectively to temporarily reduce the excise duty rates and excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products.

Human rights implications

Right to an adequate standard of living

4.4 Schedule 1 engages the right to an adequate standard of living, including food, water and housing under Article 11 of the International Covenant on Economic, Social and Cultural Rights (ICESCR).

4.5 The right to an adequate standard of living provides that Australia must take appropriate steps towards the realisation of this right in its jurisdiction, and that the relevant standard must be continuously improving.

4.6 Schedule 1 is consistent with the standard of living in Australia.

4.7 Schedule 1 is relevant to subsidies or other forms of assistance to improve housing affordability. The Schedule provides relief to consumers on the cost of fuel and oil. The objective of the Schedule, which is to ease pressures on fuel prices in Australia resulting from the conflict in the Middle East, is necessary to provide the relief. The objective of the Schedule addresses the rising cost of fuel.

4.8 Schedule 1 is rationally connected to easing pressures on fuel prices in Australia, as it is an effective way to achieve that objective. Reducing the excise and excise-equivalent customs duty rates reduces the cost of fuel by 50 per cent. Finally, the Schedule is a proportionate response to the rising cost of fuel in Australia because the Schedule directly impacts the price of fuel in Australia.

Conclusion

4.9 Schedule 1 to the Bill is compatible with human rights because, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate to the policy objective.

Schedule 2: Further fuel duty reduction

Overview

4.10 Schedule 2 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

4.11 The amendments made by Schedule 2 to the Bill assist in easing some of the impact of recent the fuel price increases resulting from the conflict in the Middle East by providing a temporary reduction in fuel excise and customs duties.

4.12 Schedule 2 to the Bill amends the Excise Tariff Act and the Customs Tariff Act to provide the Treasurer with the power to determine a lower percentage of fuel duty rate reduction than the 50 per cent that otherwise applies as a consequence of section 6K of the Excise Act and section 19AABA of the Customs Tariff Act.

Human rights implications

Right to an adequate standard of living

4.13 Schedule 2 engages the right to an adequate standard of living, including food, water and housing under Article 11 of the International Covenant on Economic, Social and Cultural Rights (ICESCR).

4.14 The right to an adequate standard of living provides that Australia must take appropriate steps towards the realisation of this right in its jurisdiction, and that the relevant standard must be continuously improving.

4.15 Schedule 2 is consistent with the standard of living in Australia.

4.16 Schedule 2 is relevant to subsidies or other forms of assistance to improve housing affordability. The Schedule provides relief to consumers on the cost of fuel and oil where a determination is made by the Treasurer. The objective of the Schedule, which is to ease pressures on fuel prices in Australia resulting from the conflict in the Middle East, is necessary to provide the relief. The objective of the Schedule addresses the rising cost of fuel.

4.17 Schedule 2 is rationally connected to easing pressures on fuel prices in Australia, as it is an effective way to achieve that objective. Reducing the excise and excise-equivalent customs duty rates reduces the cost of fuel by 50 per cent. Finally, the Schedule is a proportionate response to the rising cost of fuel in Australia because the Schedule directly impacts the price of fuel in Australia and benefits users of fuel products.

Conclusion

4.18 Schedule 2 to the Bill is compatible with human rights because, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate to the policy objective.

Schedule 3: Amendments relating to fuel tax credits

Overview

4.19 Schedule 3 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

4.20 Schedule 3 to the Bill amends the Fuel Tax Act to provide the Transport Minister with the power, on a temporary basis beginning on 1 July 2025 and ceasing on 30 June 2027, to vary the rate of the of the road user charge without regard to the restrictions on that power subsections 43-10(9), (10), (11) and (12) of the Fuel Tax Act.

Human rights implications

4.21 Schedule 3 does not engage any of the applicable rights or freedoms.

Conclusion

4.22 Schedule 3 is compatible with human rights as it does not raise any human rights issues.