Cabinet has agreed on a set of changes as it looks to roll out electronic road user charges to all light vehicles as it seeks to replace petrol tax.
A replacement of fuel excise taxes in favour of electronic road user charging is part of National’s coalition agreement with ACT.
Currently New Zealanders help pay for the roads via their vehicle licence (or “rego”) fee, road user charges (RUC) and the petrol excise duty (PED).
Minister of Transport Chris Bishop said the transition will ensure all vehicles pay based on actual road use (including weight) regardless of fuel type.
“Right now, New Zealanders pay Fuel Excise Duty (FED, or petrol tax) of about 70c per litre of petrol every time they fill up at the pump with a petrol car.
“Diesel, electric, and heavy vehicles pay road user charges based on distance travelled.”
Bishop said as hybrid and petrol efficient vehicles become more common, the way New Zealand funds its roads needed to change.
He said in 2015, there were 12,000 hybrid vehicles in the country, whereas now, there are over 350,000.
“For decades, petrol tax has acted as a rough proxy for road use, but the relationship between petrol consumption and road usage is fast breaking down.
“For example, petrol vehicles with better fuel economy contribute less FED per kilometre towards road maintenance, operations, and improvements.
“As our vehicle fleet changes, so too must the way we fund our roads. 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.”
Timeline
Bishop said the transition will happen in stages, beginning with legislative and regulatory reform to modernise the current road user charges system and enable private sector innovation.
“The current road user charges system is outdated. It’s largely paper based, means people have to constantly monitor their odometers, and requires people to buy road user charges in 1000km chunks.”
Bishop said he expects to pass legislation in 2026, followed by an updated code of practice for road user charge providers and an upgrade in systems for both New Zealand Transport Agency and police.
“By 2027, the RUC system will be ‘open for business’, with third-party providers able to offer innovative payment services and a consistent approval process in place.
“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.”
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Key legislative changes the Government is progressing include:
- Removing the requirement to carry or display road user charge licences, allowing for digital records instead
- Enabling the use of a broader range of electronic road user charge devices, including those already built into many modern vehicles
- Supporting flexible payment models such as post-pay and monthly billing
- Separating NZTA’s roles as both road user charge regulator and retailer to foster fairer competition
- Allowing bundling of other road charges like tolls and time of used based pricing into a single, easy payment
“The changes will support a more user-friendly, technology-enabled RUC system, with multiple retail options available for motorists,” Bishop said.
“Eventually, paying for RUC should be like paying a power bill online, or a Netflix subscription. Simple and easy.”
Who currently pays road user charges?
Vehicles that weigh more than 3500kg pay RUC.
Lighter vehicles also pay RUC if they are powered by diesel, electricity or another fuel that isn’t taxed at its source.
Light electric vehicles (EVs) and plug-in hybrids began paying road user charges last year. EVs that weigh more than 3500kg are still exempt from paying RUC, but will start paying them after December 31, 2025.
‘Fairer and more efficient’ – Motor Industry Association
Motor Industry Association chief executive Aimee Wiley is supportive of the Government’s plan, which she said will make for “efficient administration and compliance”.
“Converting the whole fleet to road user charges will be a major undertaking, and we will gain nothing if we do not make use of the latest technology to manage the system digitally and in real time. It’ll make compliance much easier and administration less expensive.”
She said it is the “correct approach” to determine the technology platform for the new system before deciding the approach and timeframe for the transition.
Overall, the association, which represents manufacturers and suppliers of new vehicles to New Zealand, said the move “places all vehicles on the same footing, making the system fairer and more efficient”.
‘Unique opportunity’ – National Road Carriers Association
The National Road Carriers Association said it was broadly supportive of the Government’s announcement.
Chief executive officer Justin Tighe-Umbers said the system gives New Zealand “a unique opportunity to transition the entire vehicle fleet onto a single platform that is proven to allocate cost based on actual impact on the roading infrastructure”.
“Revenue generated from the current RUC user pays model is declining, while the need for roading investment and maintenance grows. This is an unsustainable situation, and a wholesale fix is needed, including a move away from the fuel excise duty.
“NRC supports the Government’s recognition of the urgency of this situation and encourages the rapid application of expertise and resource to get it done.”
