Petrol Tax replaced by digital road user charges

The Government is proposing to phase out fuel tax and introduce electronic road user charges (RUC) for all vehicles, including petrol, diesel, electric, and hybrid cars.

Currently, petrol users pay Fuel Excise Duty (FED) of about 70 cents per litre at the pump. Diesel, electric and heavy vehicles already pay RUC based on the distance they travel.

Transport Minister Chris Bishop said petrol tax had long served as a proxy for road use, but that link is weakening as fuel-efficient vehicles become more common. He noted that newer petrol and hybrid cars use less fuel per kilometre, meaning they contribute less to road maintenance through fuel tax, despite using the roads just as much. The number of hybrid vehicles on New Zealand roads has also grown significantly, from 12,000 in 2015 to over 350,000 today.

“It isn’t fair to have Kiwis who drive less and who can’t afford a fuel-efficient car paying more than people who can afford one and drive more often,” Bishop said.

The planned changes will eventually see all 3.5 million light vehicles pay road charges based on actual use — including distance travelled and vehicle weight. There is also potential to include location and time-based pricing.

To prepare for this shift, the Government will overhaul the current paper-based RUC system. New legislation will allow:
• The removal of paper labels from windscreens
• Use of in-built vehicle computers to track distance
• Flexible billing such as monthly or post-pay options
• Separation of NZTA’s roles as regulator and retailer
• Bundled payments that include tolls or congestion charges

The Government expects to pass legislation in 2026, with the new system open to private providers in 2027. There is no set date for the full rollout to light vehicles.

“At this stage, no date has been set for the full transition of the light vehicle fleet. That’s a deliberate choice, as we’re focused on getting the system right rather than rushing its rollout,” said Bishop said.

He called the move a “once-in-a-generation change” that would future-proof how roads are funded for decades to come.