COVID-19 Updates

Be careful with fuel levy provisions

With fuel prices still high and the Fuel Tax Credit unlikely to be brought back until 28 September, members are asking how this affects their contracts, especially any fuel levy provision.

A fuel levy clause sets a base price for fuel and the mechanism that will be used to benchmark fuel pricing. It is not compulsory to be in a contract. Like all commercial issues, it should follow on from negotiation about contract terms.

Regularly reviewing contracts should be “business as usual” for NatRoad members.

How you manage the impacts of increased costs will depend on the mechanism/index used to calculate the fuel levy and, whether by its terms it can result in an increase of monies paid to the member.

Now is a good time to check that the index being used to review prices is relevant to the business and its costs. Fuel prices in Sydney may be different to other capital cities so, if all your work is in, say, Victoria, a New South Wales index is likely to be inappropriate.

Some contracts specify that the fuel levy incorporated in the rates schedule be reviewed quarterly. In some, the fuel levy may not be set out in the contract but is adjusted by the customer using a formula that it maintains or was on a web site when the contract was established.

NatRoad advises that the terms of the fuel levy should be clearly included in the contract to ensure certainty. Members should try an example calculation to make sure the formula works as expected before signing. NatRoad’s online fuel levy calculator can help.

NatRoad communications are intended to provide general information. They should not be relied upon as legal advice and the original instrument should be checked.

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