Bills Digest No. 146  1999-2000Road Transport Charges (Australian Capital Territory) Amendment Bill 2000


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details

Passage History

Road Transport Charges (Australian Capital Territory) Amendment Bill 2000

Date Introduced: 8 March 2000

House: House of Representatives

Portfolio: Transport and Regional Services

Commencement: On a day to be fixed by proclamation, or failing that, on 1 January 2001

Purpose

To implement updated national heavy vehicle registration charges as agreed by the Australian Transport Council in February 2000. (1)

Background

This Bill is one of three Bills intended to update national heavy vehicle registration charges.(2)

Origins of the heavy vehicle registration charge

In 1991, the Commonwealth, States and Territories signed an agreement to create the National Road Transport Commission (NRTC). As part of this agreement, governments also committed to a national approach to regulating heavy vehicles, including the setting of registration and other charges to be levied on heavy vehicles. The NRTC is responsible for recommending the level of charges. In making its recommendations regarding charges to the Australian Transport Council (ATC),(3) the NRTC is required to abide by the following set of principles:(4)

  • to fully recover distributed road costs while minimising over-recovery from any vehicle class, thereby achieving full recovery of all road costs
  • adopting a common methodology
  • to determine and collect charges in a way that achieves a reasonable balance between administrative simplicity, efficiency and equity in the charging structure
  • to improve pricing, leading to a better allocation of resources, with investment decisions on equipment and infrastructure being based on more relevant demand signals, and
  • to minimise the incentive for operators to 'shop around' for lower charges and undermine the integrity of the national charging system.

There are actually two components to heavy vehicle charges targeted to recover road use costs. The first is a fuel charge, in which 18 cents out of the total 44 cents per litre excise on diesel fuel currently paid by vehicle operators is nominally considered to count as recovery against road costs.(5) This raises about two-thirds of the calculated road costs. The second component, which is the subject of this Bill, is the heavy vehicle registration charge.

The current registration charges were agreed by the ATC in 1992 and implemented by the ACT through the Road Transport Charges (Australian Capital Territory) Act 1993. The various States and Territories then implemented the charges in their jurisdictions during 1995 and 1996 by either using the 1993 Act as a template for new legislation or incorporating its substance into existing legislation. The charges have not been updated since then. They currently range from $300 per year for smaller heavy vehicles and buses under 12 tonnes up to $8500 for larger road trains.(6)

The proposed increases to registration charges are to be implemented by amending the Road Transport Charges (Australian Capital Territory) Act 1993. The intention is the States and Territories would then make similar changes to their legislation in time for a 1 July 2000 start date.(7)

The rationale for updating the heavy vehicle registration charge

In August 1998, the NRTC circulated a draft policy paper canvassing options for updating heavy vehicle registration charges.(8) The major reason for the changes proposed in that discussion paper (and subsequently carried over to the Explanatory Memorandum and regulatory impact statement (RIS)), is that the current level of charges does not recover the cost of damage to the roads by heavy vehicle use. In 1992, the national annual cost of heavy vehicle use was estimated at $1,023 million. This has since risen to $1,280 million. The current registration charges raise $399 million, which combined with the fuel charge, raise a total of $1,270 million - ie a shortfall of about $10 million. In relation to this, the RIS says

In aggregate the under recovery of revenue is not large. However, the degree of under-recovery of some vehicles, due to their use and certain characteristics, is more significant. For example around 10 per cent of road costs for 6-axle articulated trucks and twenty per cent for road trains are not recovered by current charges.

As the productivity of heavy vehicles improves and road expenditure increases, the heavy vehicle share of road construction and maintenance will increase further. Consequently, under-recovery (in particular for the largest vehicles), can be expected to increase over time. Therefore it is important that the charge levels are regularly updated.(9)

The damage caused to roads by various types of vehicles is also now better understood than in 1992 when the current charges were recommended. This more recent research has apparently indicated that under the current charges smaller heavy vehicles effectively subsidise heavier vehicles.(10) As a consequence, charges for smaller heavy vehicles, which constitute over 80% of the vehicles subject to the registration fees, will not change under the Bill. Road trains and conventional semitrailers face increases of around 5%. The most significant proposed change under the Bill is for certain classes of articulated trucks which face an increase of 70%.(11)

The proposed new registration charges are forecast to raise $425 million per year which, combined with the lift in the nominal apportioning of fuel excise to 20c a litre, raises a total of $1,393 million.(12)

Impact of changes on operating costs and freight charges

The Explanatory Memorandum states that the 'increases represent around 1%(13) of operating costs, and are expected to have little impact on freight costs, particularly due to the much larger expected benefits due to concurrent tax system changes.'(14)

The main tax changes referred to are the elimination of sales tax and the effective reduction of the diesel fuel excise through the Diesel and Alternative Fuels grants scheme.(15) The RIS contains the following example to illustrate the effect of the changes.(16)

For all vehicle classes, the effect of reducing the effective rate of diesel excise from 43 c/l to 20 c/l and the effect of removing sales taxes are substantial.

The vehicle classes for which increases in proposed registration charges are likely to be greatest (ie the larger vehicles) will receive the greatest benefit from the excise and sales tax reductions (due to higher capital costs, higher distances driven, greater numbers of tyres and higher fuel consumption rates).

 

Table 04.1: Estimated Implications of Taxation Reforms: Selected Vehicle Classes

($ per vehicle per annum)

Vehicle Type

Fuel Tax Savings

Sales Tax Savings

Net Savings

Rigid Trucks

 

 

 

2 axles (7 to 12 tonnes) Rural

800

1,000

1,800

2 axles (7 to 12 tonnes) Urban

0

1,000

1,000

3 axles (over 18 tonnes)

2,600

3,500

6,100

Articulated Trucks (6 axles)

12,700

8,600

21,000

B-doubles (9 axles)

24,700

20,800

41,070

Road Trains (triple trailer)

38,000

18,600

56,200

Buses (3 axle rigid)

4,400

na

4,400

Notes: Sales tax savings comprise reductions in sales tax on parts, tyres and purchase of new vehicles

The estimates shown are based on the average distance, mass and fuel consumption for each vehicle class. They do not reflect differences due to variations in use of vehicles. Vehicles that travel further than the average can be expected to have greater savings in distance-related taxes such as fuel. Vehicles travelling less than average distance would have lower savings in these taxes

Sources:Fuel Excise Savings: NRTC estimates of fuel consumption (Updating Heavy Vehicle Charges: Technical Paper, September 1998) based on 1995 ABS Survey of Motor Vehicle Use

Sales Tax Savings: NRTC estimates based on ARR 248 Survey of Freight Vehicle Operating Costs 1991, updated to current prices using Transeco cost indices

Indexation of registration charges

The RIS states that recalculating the charges as has been done for the purposes of the Bill is resource-intensive and suggests that the charges could be indexed to CPI changes in order to partially(17) avoid the situation in which, over time, charges fall below what is required to recover roads costs.(18) This proposal was recently discussed by the ATC,(19) with West Australia and the Northern Territory opposing the idea. Implementation of indexation is due to by discussed at the May 2000 meeting of the ATC and as a consequence is no indexation provision is included in the Bill.

Competition between road and rail transport(20)

The proposed charges are unlikely to have any significant direct impact on the relative competitiveness of rail and road freight. On this point, the regulatory impact statement comments

Impacts of the revised charges on road-rail competition are likely to be minimal. Registration charges for road freight vehicles which compete most directly with rail are subject to the largest increases (6-axle articulated trucks and B Doubles), as a result of a higher degree of cost recovery from these vehicle classes. However, as the registration charges are a small proportion of vehicle operating costs, it is likely that the extent of these revised charges will be small.(21)

As previously mentioned, the Bill does not deal with the fuel excise component of road use cost recovery since this is only a nominal charge. However, it is worth noting that fuel is a greater proportion of the operating costs of road transport as compared to rail and thus the reductions in fuel excise potentially benefit road transport. A recent Bureau of Transport Economics report, commented that, in relation to the proposed abolition of sales taxes and reduction of fuel excise under the Commonwealth Government's new tax system (ANTS) and the Diesel and Alternative Fuels Grants Scheme,

If [these] had been in place in 1998-99, average input costs for interstate non-bulk rail and interstate non-bulk road would have been 8 per cent and 15 per cent lower, respectively, than actual average input costs in 1998-99. If such changes in costs were reflected in freight rates, then growth in road's share of interstate non-bulk freight would increase marginally at the expense of rail's share.(22)

Environmental issues

In addressing the issue of environmental impacts of heavy vehicles, the 1998 NRTC draft policy paper comments that

most [environmental impacts] are specific to geographical areas and may not be susceptible to treatment through a national charging process. However, the Commission suggests that future charging structures could closely examine options in this regard, in conjunction with the Motor Vehicle Environment Committee and the National Environment Protection Council.(23)

This inability of the NRTC's charging structure to explicitly allow for the incorporation of environmental considerations is confirmed by the RIS. The RIS states

At present there is no direct means of taking account of [environmental] issues in heavy vehicle charges. The Commission(24) is concerned that reductions in registration charges for the heavy vehicles which are used most intensively in urban areas would present a perverse message. It does not believe it is appropriate to lower registration charges for vehicles that are predominantly used in urban distribution and are likely to have high external costs of air and noise pollution. This is one of two reasons that reductions in fixed annual charges for smaller heavy vehicles are not proposed, even though the current fixed annual charges for these vehicles, in conjunction with the fuel-based charge will lead to over-recovery on average. This position will be reconsidered when options for directly taking account of environmental costs of heavy vehicles are considered.

The NRTC however begun a process to formulate a long-term strategy for improving heavy vehicle charges. One of the issues flagged for possible examination as part of this process is the extension of cost recovery targets to include global external costs such as costs of greenhouse gas emissions.

Main Provisions

Schedule 1

Item 1 sets out the obligation of the ACT Government to determine registration and permit charges. It also provides that if the Act commences on or before 1 July 2000, the new charges start from 1 July, but otherwise they start when the Act commences.

Items 2-39 amend existing technical definitions in the Road Transport Charges (Australian Capital Territory) Act 1993 relating to heavy vehicle types and specifications or insert new definitions. According to the Explanatory Memorandum, the definitions 'change and clarify how some vehicles are defined for charging purposes and also to simplify the calculation of charges...[and]...provide greater consistency between the Act and other national legislation developed under the road transport reform process through the National Road Transport Commission'.(25)

Item 40 repeals the existing charges and substitutes a set of new charges applicable to heavy vehicles according to class of vehicle, weight, number of axles etc. It also specifies that if a vehicle falls into two or more charging categories, the higher charge applies.

Item 42 clarifies that the ACT Government will continue to levy the current heavy vehicle registration and permit charges until 1 July 2000 or, if the Act comments at a later date, until that date.

Endnotes

  1. National Road Transport Committee 'Updated National Heavy Vehicle Charges' News release 14 February 2000.
  2. The others are the Interstate Road Transport Amendment Bill 2000 and the Interstate Road Transport Charge Amendment Bill 2000.
  3. The Council consists of relevant Commonwealth, State and Territory Ministers.
  4. See Schedule 1 of the National Road Transport Commission Act 1991
  5. Note that under the modified A New Tax System (ANTS) regime, the excise payable by heavy vehicle operators will drop to 20c a litre.
  6. See p (v) of the Regulatory Impact Statement contained in the Explanatory Memorandum.
  7. Australian Transport Council, Communique of 12 November 1999.
  8. National Road Transport Commission 'Updating Heavy Vehicle: draft Policy Paper' August 1998
  9. Regulatory Impact Statement, op cit. P. 1.
  10. Martin, T 'Estimating Australia's attributable road truck costs', ARRB Transport Research Report No 254, November 1994.
  11. Regulatory Impact Statement , op cit. P. (v).
  12. Ibid.
  13. It is not clear from the Explanatory Memorandum whether this 1% would apply to the class of articulated truck that will be subject to the 70% increase mentioned above.
  14. Explanatory Memorandum p. 2.
  15. Background on the scheme can be found in Bills Digest no. 34 1999-2000 'Diesel and Alternative Fuels Grants Scheme Bill 1999' . http://www.aph.gov.au/library/pubs/bd/1999-2000/2000BD034.htm
  16. Regulatory Impact Statement, op cit. P. 31.
  17. The diesel fuel excise component, which accounts for approximately two-thirds of the recovery of road costs, will not be indexed.
  18. Regulatory Impact Statement, op cit. P. 21.
  19. Australian Transport Council 'Ministers Vote on Indexation' News Release 2 March 2000.
  20. For more background on the issue of Rail Transport see Richard Webb, 'Issues in Rail Reform' Parliamentary Library Research Paper no. 14 1999-2000 http://wopared/library/pubs/rp/1999-2000/2000rp14.htm.
  21. Regulatory Impact Statement , op cit. pp 39-40.
  22. Bureau of Transport Economics 'Competitive Neutrality between Road and Rail', Working paper no. 40, September 1999 p ix.
  23. National Road Transport Commission, op cit p. 17.
  24. Ie the NRTC
  25. See p. 4 of the Explanatory Memorandum.

Contact Officer and Copyright Details

Angus Martyn
6 April 2000
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 2000

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 2000.

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