A policy proposal to phase-out Australia's Fuel Tax Credit (FTC) scheme for its largest beneficiaries with a transition tax incentive scheme to accelerate electrification and decarbonisation. The FTC scheme rebates the full federal fuel tax on imported diesel used off-road in industry, predominantly mining. The paper posits that the FTC scheme is an unsustainable fossil fuel subsidy undermining decarbonisation and energy security. It argues that the fuel tax does not fund roads – it is industry assistance.

The paper proposes that the federal FTC scheme, which subsidises imported high-emissions diesel use, be capped at $50 million per year per consolidated group claiming under the scheme. It recommends a ‘Transition Tax Incentive’ to reform the FTC scheme. This would reform the FTC scheme into a ‘cap-and-reinvest’ model, turning a headwind to diesel displacement by electrification and decarbonisation into a tailwind. 

A $50m cap means no changes to fuel tax credits to farmers, road transport companies, agriculture, family businesses, sole traders or small-medium enterprises.