It will cost motorists about 60 cents more to fill their car with petrol from August if the Abbott government can convince parliament to approve new legislation.
Indexation of the fuel excise will be re-introduced with half-yearly increases in line with inflation.
While motorists won’t feel too much pain initially – the government estimates an extra burden of $24 a year – by 2018 the effect of compound interest will mean the impact is 10 times that.
The return of indexation will provide $2.2 billion for the government’s coffers by then, with about $157.5 million being generated in the 2014-15 financial year.
The money will be pooled into a special account to fund road building.
Exempted from the changes are heavy vehicles and businesses with off-road vehicles, which are entitled to fuel tax credits.
The government has the numbers in the lower house to have its legislation pass first base, but its fate in the Senate is not so certain.
Labor opposes the move, while the Greens will support it on the proviso the revenue isn’t spent on roads.
The Palmer United Party, which will play a crucial role in the upper house from July 1, has indicated it will oppose the measure.
The excise has been frozen at 38.14 cents since 2001, when the Howard government abolished the six-monthly indexation of fuel tax rates after the introduction of the GST.