Transport and Infrastructure Minister Chris Bishop. Photo: NZME / Mark Mitchell
The government is inching closer to replacing petrol tax with electronic road user charges (RUCs) on all light vehicles.
Transport Minister Chris Bishop said it was the "biggest change to how we fund our roading network in 50 years".
The move would put an end to the existing two-tier system where petrol users pay fuel excise duty of about 70 cents a litre at the pump, while diesel, electric and heavy vehicles pay paper-based road user charges based on distances they travel.
While no date has been set for a full transition, it's expected a new digital system where all motorists pay a bill online will be 'open for business' by 2027.
"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," the minister Chris Bishop said.
He said petrol vehicles with better fuel economy contribute less FED (fuel excise duty) per kilometre towards road maintenance, operations, and improvements.
"We are also seeing a fast uptake of fuel-efficient petrol hybrid vehicles. In 2015, there were 12,000 on our roads, while today there are over 350,000," he said.
Bishop said as the vehicle fleet changed, the way it was funded had to follow.
"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," he said.
"This is a change that simply has to happen. The government has recognised reality and is getting on with the transition."
The coalition's transition will happen in stages, beginning with legislative and regulatory reform to modernise the current RUC system and faciliate private sector innovation.
"The current RUC system is outdated. It's largely paper-based, means people have to constantly monitor their odometers, and requires people to buy RUC in 1000 km chunks," Bishop said.
"We're not going to shift millions of drivers from a simple system at the pump to queues at retailers. So, instead of expanding a clunky government system, we will reform the rules to allow the market to deliver innovative, user-friendly services for drivers."
Bishop said a handful of E-RUC companies already did this for about half of the country's heavy vehicle fleet and there were several companies, both domestic and international, with technology that could make complying with RUC cheaper and easier.
Law changes the government is progressing include:
- Removing the requirement to carry or display RUC licences, allowing for digital records instead
- Enabling the use of a broader range of electronic RUC 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 RUC 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.
Transport and Infrastructure Minister Chris Bishop speaking at infrastructure conference Building Nations 2025 at Tākina in central Wellington Photo: RNZ/Anneke Smith
Bishop promised the changes would support "a more user-friendly, technology-enabled RUC system" with multiple retail options available to motorists.
"Eventually, paying for RUC should be like paying a power bill online, or a Netflix subscription. Simple and easy," he said.
"I expect to pass legislation in 2026, followed by an updated Code of Practice for RUC providers. We will also engage with the market in 2026 to assess technological solutions and delivery timelines. In parallel, NZTA and Police will upgrade their systems to support enforcement in a digital environment."
The coalition expects the RUC system will be 'open for business', with third-party providers able to offer payment services and a consistent approval process in place by 2027.
"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," he said.
"This is a once-in-a-generation change. It's the right thing to do, it's the fair thing to do, and it will future proof how we fund our roads for decades to come."
Change could 'clobber' people struggling with cost of living, Labour says
Labour leader Chris Hipkins said moving to a new road user charges system was inevitable, but he was worried about the timing.
"I'm concerned that the government are proposing to hike up fuel excise straight after the election, 12 cents a litre, at the same time as shifting to road user charges.
"That could be a real burden, particularly for New Zealanders who are struggling with the cost of living at the moment, and they haven't set out a transition plan for how they're going to make sure that Kiwis don't get absolutely clobbered by this change."
Hipkins said he would need to see the finer details of how the government was going to implement the new system before Labour could commit to supporting it.
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