How to calculate a fuel levy for your transport business

Diesel is one of the biggest costs in running trucks, and it doesn't sit still. A fuel levy (or fuel surcharge) lets you keep your base rates steady while passing on fuel price movements fairly, both up and down. Get the method right and it's transparent, defensible and easy to explain to customers. Get it wrong and you either quietly lose money or end up arguing over every invoice.

Here's the method we use, based on the approach set out in NatRoad's fuel levy guide.

The three numbers you need

1. Base fuel price. The diesel price your base freight rates were set at, agreed with the customer at the start of the contract.
2. Current fuel price. Today's price, from the same source.
3. Fuel cost share. Fuel as a percentage of your total operating costs.

Use an independent price source

Both prices should come from an objective, published source, not your own fuel receipts. NatRoad recommends the Australian Institute of Petroleum (AIP) weekly diesel prices, which are published nationally and by city. Agree in writing which series you'll use (e.g. Melbourne, Sydney or national average).

Take out GST and fuel tax credits

You don't pay GST on fuel in the end (you claim it back), and heavy vehicles on public roads can claim fuel tax credits. So compare like with like:

• Divide the pump price by 1.1 to remove GST.
• Subtract the net fuel tax credit for heavy vehicles on public roads (fuel excise minus the road user charge).

Fuel tax credit rates change regularly (they're indexed twice a year, and were temporarily changed during the 2026 fuel crisis), so always use the ATO's current rate for the period you're calculating.

Work out your fuel cost share

Fuel cost share = annual fuel spend ÷ total annual operating costs.

Use your actual accounts. For many trucking businesses this lands somewhere around a quarter to a third of costs, but yours depends on your fleet, work type and routes. That's why you should calculate your own rather than borrow someone else's.

The formula

Step 1: fuel price increase

Price increase % = (current price − base price) ÷ base price

Step 2: levy percentage

Levy % = price increase % × fuel cost share %

Step 3: apply it

Fuel levy ($) = levy % × the freight charge it applies to

Worked example

Illustrative figures (use current AIP prices and ATO rates for real calculations):

• Price increase: (188.89 − 161.62) ÷ 161.62 = 16.87%
• Fuel cost share: 30%
• Levy: 16.87% × 30% = 5.06%

Applied to the freight charge:

• On a $1,000 interstate job: 5.06% × $1,000 = $50.60
• On an hourly job, 3.5 hours at $165/hr = $577.50: 5.06% × $577.50 = $29.22

If fuel drops below the base price, the levy goes to zero, or becomes a credit if your agreement says so.

Put it in the contract

The calculation is the easy part. Disputes come from vague agreements. NatRoad recommends a formal contract or explicit written agreement covering:

• The price source and region (e.g. AIP weekly, Melbourne terminal gate)
• Review frequency: weekly, fortnightly or monthly
• A trigger threshold, e.g. the levy only changes if fuel moves more than 2%
• The base price, fixed for the life of the contract. Every period, you go back to the agreed base.
• What happens if the price source stops being published
• How you'll notify customers of changes

And on every invoice, show the fuel levy as its own line item. Customers accept a transparent levy far more readily than a mysterious rate rise.

Common mistakes

• Calculating the levy on the levy. Apply it to the base freight charge only.
• Changing the base price each period instead of measuring against the agreed base.
• Using your own fuel receipts as the price source. It's not independent, and it's hard to defend.
• Forgetting GST and fuel tax credits, which overstates or understates the movement.
• Setting it and forgetting it. If you agreed weekly updates, update weekly.

How TrakkHQ handles fuel levies

TrakkHQ applies each customer's agreed fuel levy automatically to every job and shows it as its own line on the invoice that goes to Xero. Nobody retypes it, and nobody forgets it on a busy Friday.

Book a demo

FAQ

Is a fuel levy the same as a fuel surcharge?
Yes. The terms are used interchangeably in Australian transport.

Should the levy apply to waiting time and other charges?
That's a commercial decision to agree with each customer. Many operators apply it to cartage only. Whatever you choose, write it into the agreement.

Can I use NatRoad's calculator?
Yes. NatRoad publishes a fuel levy calculator alongside its guide. It's a good way to sanity-check your numbers.

Sources

• NatRoad, The building blocks of a fuel levy
• NatRoad, Fuel levy calculator
• Queensland Trucking Association, ATO confirms new fuel tax credit rates

This guide is general information, not financial or tax advice. Check current ATO fuel tax credit rates and get advice for your circumstances.