Annual adjustment of heavy vehicle charges

The NTC is responsible for calculating annual heavy vehicle charges, which are a combination of annual registration and fuel-based road user charges (RUC).

Every few years this involves a determination. This is when the NTC reviews the base charges for all heavy vehicle types and recommends a new set of base charges to the Infrastructure and Transport Ministers’ Meeting (ITMM).

In the years between determinations, the NTC applies an annual adjustment formula to heavy vehicle charges to adjust them by a common percentage, known as the annual adjustment factor.

The annual adjustment formula is approved by the ITMM and is contained within the Heavy Vehicle Charges Model Law. The annual adjustment allows revenue from heavy vehicle charges to keep pace with changes in heavy vehicle fleet use and with governments’ road spending programs.

Annual adjustments apply automatically unless the ITMM directly approves heavy vehicle charges, either as the outcome of a determination, or for other reasons. The ITMM directly approved heavy vehicle charges to apply from 2016–17 to 2021–22 which means that the annual adjustment does not apply in these years. ITMM will approve heavy vehicle charges for 2022-23 as an outcome of the current heavy vehicle charges determination.

Changes to the annual adjustment method and reporting

The current annual adjustment method, contained in the Heavy Vehicle Charges Model Law, was approved by the ITMM on 6 November 2015. There have been a number of small amendments since then to ensure the mechanism applies as intended.

The method uses parameters from the pay-as-you-go (PAYGO) model to establish the cost base for the annual adjustment rather than using assumed changes in road use and expenditure, which are less precise. This adjustment formula and the updated Heavy Vehicle Charges Model Law now require the NTC to report new expenditure, road use and cost allocation data in its annual report. This data is included in the tables within this appendix.

The allocable arterial and local road expenditure data in Table D1 allows for the calculation, if required, of the revised adjusted base cost for the 2022–23 charges. The expenditure estimates are separated into arterial and local, urban and rural road expenditure, and into a range of expenditure categories.

The PAYGO model only includes expenditure that is related to heavy vehicle road use to determine the heavy vehicle charges cost base (known as allocable expenditure). The expenditure estimates exclude 75 per cent of urban local road expenditure and 50 per cent of rural local road expenditure because these proportions relate to the provision of access and amenity services, which are recovered through local government rates and developer contributions.

Road expenditure shown in Table D1 is averaged over seven years using the exponential moving average method (EMA7). The arterial road expenditure estimate in Table D1 has been affected by a restatement of road expenditure by Victoria for the 2019-20 year resulting in a higher estimate over the seven years.

Tables D1 to D5 have been calculated using the current annual adjustment methodology and PAYGO model settings. They do not incorporate any of the technical changes explored as part of the current heavy vehicle charges determination.

State and territory road authorities provide the NTC with the most recent arterial road expenditure data in accordance with the agreed expenditure reporting categories. The Australian Bureau of Statistics (ABS) provides the estimates of local council spending on roads from unpublished government finance statistics.

Table D2 shows the cost allocation rules (or proportions) used in the PAYGO model.

The PAYGO model has four allocators that are used to apportion road expenditure across the vehicle fleet to determine the share of costs the heavy vehicle industry should pay. The allocators are:

• VKT (vehicle kilometres travelled)
• PCU-kms (passenger car equivalent kilometres) – a measure of the relative space a vehicle type occupies on the road
• ESA-kms (equivalent standard axle kilometres) – a measure of pavement wear
• AGM-kms (average gross mass kilometres) – a measure of the general impact of a load on the road.

Table D3 shows the road usage values used in the PAYGO model. The four road use allocators are VKT, PCU-kms, ESA-kms and AGM-kms, as summarised under 'cost allocation rules.' Values are provided for arterial and local roads and as totals. They are also split between the total vehicle fleet and heavy vehicles only.

The road usage values in Table D3 use seven years of available data from the ABS Survey of Motor Vehicle Use (SMVU). This data is averaged using the same EMA7 method used for Table D1. The heavy vehicle cost base is determined using the road usage data from Table D3, combined with the cost allocation rules in Table D2 and the expenditure data from Table D1.

The data in Table D4 allows for the calculation, if required, of the annual adjustment factor for the 2022–23 charges. Table D4 shows the estimated heavy vehicle fuel use and registration revenue for heavy vehicles and heavy trailers. Fuel revenue can be calculated by multiplying the heavy vehicle fuel use reported here by the current RUC. Fuel use is estimated using the EMA7 method. The estimated vehicle and trailer revenue figures are based on average jurisdiction registered fleet data in the latest financial year.

Table D5 provides road construction and maintenance expenditure for 2020–21. These estimates exclude Commonwealth road expenditure under the Disaster Recovery Funding Arrangements and any insurance-related expenditure approved by transport ministers.

The NTC is required to report the road construction and maintenance expenditures contained in Table D5 under Clause 5.1(j) of the Inter-Governmental Agreement for Regulatory and Operational Reform in Road, Rail and Intermodal Transport.

The NTC obtained this data from state and territory road agencies.