Road transport businesses are feeling the impact of the fall in Consumer Price Index (CPI) figures, which for the June 2020 Quarter, was 1.9%. This is the largest fall since the Australian Bureau of Statistics (ABS) started recording quarterly CPI data since 1948. With Victoria’s move to ‘Phase 4’ lockdowns associated with the COVID-19 pandemic, restrictions to the movement of people and goods are further adding to deflationary forces as demand for transport in that State dries up.
With the decline in the inflation rate, the knock-on implications include some customers wanting to adjust the fuel levy to take into account the decline in diesel fuel prices. NatRoad is advising members that now is a good time to check your contracts both to assess the fuel levy provision and to make adjustments about conditions of delivery and sign-off processes on delivery in light of the pandemic. In particular, it is important to check that the index used to review fuel prices in the fuel levy provision is relevant to the business and its costs.
Reviewing the fuel levy can be complicated. For example, fuel prices in Sydney are different to other capital cities, so using a New South Wales index might be inappropriate if you do the majority of your business in another State. Some operators also have transport contracts which specify that the fuel levy incorporated in their rates must be reviewed quarterly, even though the fuel levy is not set out in the contract. So too much discretion is held by the customer and operators should press for having a copy of the fuel levy provision in use so they can check the calculations. Some operators also have the fuel levy adjusted by the customer with reference to an old fuel levy formula that was used when the contract was established. The question should be: is this clause still relevant?
Gillian Bristow from Bristow Legal notes that many of the issues with fuel levy provisions relate to poor drafting of contracts resulting in uncertainty.
“Drivers often struggle with issues like, is GST included or not in the quoted fuel prices, or is the levy linked to the price for diesel fuel and is it a point in time price, and average price, a wholesale price or a retail price. Sometimes this is not clear,” Gillian said.
Gillian recommends that drivers perform an example calculation to make sure the formula works as expected. Errors in fuel levy clauses often cause a rise in the fuel price, resulting in a levy decrease, instead of an increase.
NatRoad advises that the terms of any fuel levy provision be included in the contract to ensure certainty and avoid an incorrect reduction in revenue to the driver. NatRoad members are welcome to discuss any queries about fuel levy clauses in their contract with NatRoad advisers.