Motorists will pay a few cents extra to fill up their cars twice a year under measures introduced to parliament.
The federal government has pushed the accelerator on its revival of indexation of the fuel excise, bringing draft laws to the lower house on Tuesday, just hours after securing Labor’s backing.
Similar measures were enacted through tariff proposals last year but the laws ensure regular rises will be permanent.
Typical motorists pumping 50 litres of fuel a week into their vehicle will pay 40 cents extra.
“The impact on households has been modest, but the impact on the budget is significant,” Treasurer Joe Hockey told parliament on Tuesday.
A special fund will be set up to put $1 billion towards fixing up regional roads.
Labor said the fund was the key reason why it changed its mind on what it once labelled Tony Abbott’s bowser bandit tax.
Shadow treasurer Chris Bowen acknowledged the about-face, but said the opposition had no choice because the revenue raised so far was likely to go back to big oil companies.
Earlier, Opposition Leader Bill Shorten said the compromise offer was a difficult decision for Labor.
“In a beauty parade, between giving money to oil companies and putting money back into Australian roads, generating jobs and confidence, it is clear which way Labor has to go,” he said.
The government estimated it would raise $3.6 billion over five years to the end of 2018/19, and $23 billion over the next decade.