Article by James Nason, courtesy of BEEF CENTRAL
30.01.2026
THE diesel fuel rebate is emerging as a growing pressure point for the agricultural sector in 2026 following renewed public scrutiny of the scheme last year.
The diesel fuel rebate – officially known as the Fuel Tax Credits Scheme – refunds fuel excise paid on diesel used off-road. Mining is the largest recipient of the credits, accounting for about 50 percent of total payments, compared with around 15 percent for agriculture.
Farmers and miners have long made the point that the fuel excise was implemented to fund public roads, and because most farming and mining machinery operates on private land, the rebate is a correction to prevent businesses paying tax on inputs unrelated to road use.
The National Farmers Federation has stated that removing the scheme would significantly increase food production costs, damage regional economies and erode the global competitiveness of Australian farmers, many of whose international competitors do not face fuel taxes on off-road agricultural diesel.
Critics of the rebate – including some economists, climate groups, Teal independents and senior figures within government – are increasingly moving to reframe the rebate as a “fossil fuel subsidy” that encourages diesel consumption and hampers emissions reduction.
Rebate “insane”: Climate Change Authority chair
Public debate on the issue was reignited in October when Prime Minister Anthony Albanese government’s top climate advisor Matt Kean called for the Fuel Tax Credits Scheme to be scrapped and its funding to be redirected towards electrification technologies, rather than supporting what he has described as “legacy” industries.
Speaking at an Australian Financial Review event in Sydney last October, the Climate Change Authority chair said continuing “to provide the diesel fuel rebate to big mining companies and whatnot at the expense of helping Australian consumers benefit from electrification is insane”.
“Nature is not going to be fooled. The atmosphere counts the costs of emissions,” he said.
His comments followed the release of a mid-year report by Climate Energy Finance, a think tank focused on emissions reduction policies, which suggested the country’s biggest miners have banked almost $60 billion in diesel fuel tax subsidies in less than 20 years.
Independent senator David Pocock also weighed into the issue on social media last year, branding the diesel fuel rebate as a “subsidy”
“If you don’t use the road, you don’t pay the excise”
At an end-of-year livestock industry conference in Western Australia, mining industry leader David Parker identified the rebate as key pressure point for the the agricultural, resources sectors and remote and indigenous communities to be aware of in 2026.
Addressing the 2025 Livexchange conference in Perth in November, Mr Parker said the rebate was simply a refund of a tax that should never apply when fuel is used off-road.
WA Minerals Council of Australia executive director David Parker speaking at the 2025 LiveXchange conference in Perth.
“That’s a pretty fundamental, straightforward policy,” he said.
“If you don’t use the road, you don’t pay the excise.”
With a concerted campaign again underway to reposition the rebate as a subsidy, Mr Parker said it was critical for rural, regional and remote communities – including Indigenous communities – to remind policymakers how damaging the loss of the fuel tax credit would be.
“The cost of power would effectively double for operations reliant on diesel – mineral processing, remote power generation, the seafood industry, offshore vessels – the list goes on,” he said.
“Lighting the fuse on a multi-billion-dollar tax bomb”
In 2023, the NFF warned that proposals from the Grattan Institute to wind back the scheme would be economically disastrous, describing the idea as “lighting the fuse on a multi-billion-dollar tax bomb that would send a cost-of-living shockwave down the supply chain”.
“Imposing a road tax on vehicles that don’t use roads just doesn’t stack up,” then NFF president Fiona Simson said. “Tractors and boats don’t drive on roads, so they shouldn’t pay road tax. Should we also start paying tolls on toll roads we don’t drive on?”
