When diesel prices move, a transport business has to change three things together: the fuel levy on customer invoices, the rates paid to owner-drivers and subcontract carriers, and the RCTIs or bills that pay them. The fuel levy calculation itself is simple. The hard part is making the same price movement reach every customer, every driver and the accounts at once, with a record of what changed and when. In 2026 that became a legal question too, because the Fair Work Commission ordered fuel cost increases to be passed down the road transport chain. This is general information, not legal or tax advice.
Where the Fair Work fuel cost recovery order stands
The facts below come from the Fair Work Commission's case page for matter MS2026/1 and its decisions, checked on 22 October 2026.
- 20 April 2026: an Expert Panel made the Road Transport Contractual Chain Order – Fuel Cost Recovery – 2026, on an application by the Transport Workers' Union and the Australian Road Transport Industrial Organization. It took effect on 21 April 2026.
- What it required: parties in a road transport contractual chain had to adjust the rates they pay for road transport work to cover increases in fuel costs after 6 March 2026, and pass those adjustments down the chain to the people doing the work.
- The switch-off: the order said its obligations stop if the weekly average national terminal gate price for diesel, as reported by the Australian Institute of Petroleum, falls below 200 cents a litre. That happened in the week ending 5 June 2026, so the obligations stopped applying. The order itself was not revoked.
- Diesel went back up: the Commission's 16 October decision records that the weekly national average terminal gate price rose back above 200 cents a litre in the week ending 17 July 2026.
- The review hearing: first listed for 28 September, it was moved and heard on 9 October 2026.
- 16 October 2026: in decision [2026] FWCFB 278, the Expert Panel said it proposes to vary the order to switch the obligations back on, from a date still to be set. The proposed changes include adjustments monthly rather than fortnightly, letting an agreed fuel levy satisfy the obligation where reasonable steps have been taken to make sure it covers the increased fuel cost, and having the obligations stop only after diesel stays below 200 cents a litre for four consecutive weeks.
- Submissions close 4 pm AEST on Friday 23 October 2026.
At the time of writing the obligations are not in force, but the Commission intends to restart them with changes. The final terms and start date were not yet known. Check the current position on the Fair Work Commission's fuel cost recovery case page and get advice on how it applies to your contracts.
How a fuel levy is usually calculated
Many Australian carriers tie the fuel levy to a published diesel price. A common approach, used by industry calculators such as NatRoad's, is:
- Agree a base diesel price with the customer at the start of the contract.
- Each period, take the current price, often the Australian Institute of Petroleum terminal gate price or an average of it.
- Convert both to a net price: take out GST and deduct fuel tax credits.
- Levy = (current net price − base net price) ÷ base net price × fuel's share of your operating costs.
The levy is then applied to the freight charge on each job.
That part is well served. Free calculators exist, and many transport management systems (TMS) apply a levy to customer charges. If you charge one levy to every customer, pay drivers a flat rate with no fuel component, and the TMS posts correctly to Xero or MYOB, you may not need anything else.
Where it goes wrong when the price moves
Problems start when one price change has to be applied in several places by hand.
Customer levies drift apart
Customers have different base prices, review periods and formulas. Someone updates a spreadsheet, then has to change each customer's rate in the TMS. Some get the new levy late, and some never had one set up.
Owner-driver rates lag behind
The levy you charge customers and the fuel component you pay owner-drivers are often worked out separately. Customer levies may move this week and driver rates next month, or not at all. Under an order like the 2026 one, that gap matters.
RCTIs carry the old rate
If you pay owner-drivers with recipient-created tax invoices (see what an RCTI is), the RCTI uses whatever rates are held in the TMS, a spreadsheet or a template. If the new rate didn't get there before the run, drivers are paid the old rate and someone fixes it by hand next period.
Nobody can prove what happened
Commentary on the 2026 order from law firm HWL Ebsworth advised keeping records of fuel costs, correspondence and documents exchanged in the chain as evidence of compliance. In many offices that evidence is scattered across a spreadsheet, emails, the TMS and Xero.
Setting it up so one change flows through
The fix is to treat a fuel price change as one event with one set of rules, not a list of jobs for different people.
- One fuel price source. Record the index you use (for example the weekly terminal gate price), the date and the figure, in one place. Every calculation reads from it.
- Customer levy rules held once. Each customer's base price, formula and review period lives in a rate table, not in someone's head. When the price updates, the new levy for each customer is worked out and pushed to the TMS or invoicing system, ready for the next invoice run.
- Driver and subcontractor rates linked to the same event. Each owner-driver's or carrier's fuel component is set by a rule tied to the same price update: a share of the levy, a rate per kilometre or hour, or a reimbursement, whatever your agreements say.
- RCTIs produced from the updated rates. The RCTI run picks up the new rates automatically, so drivers are paid on the right figure from the effective date. Bills land in Xero or MYOB with the fuel component shown separately.
- A change log as evidence. Each update records the index figure, the date, the old and new rates for each customer and driver, and who approved it. That record answers the question "did you pass it on, and when?" without anyone digging.
- A check that the two sides match. A simple report compares fuel levy charged to customers with fuel amounts paid to drivers, by period, so gaps show up before month-end rather than in a dispute.
Our fuel levy and owner-driver payments service covers this end to end, and RCTI automation covers the RCTI agreements and the run itself.
When a single system is enough
If your TMS already holds customer levy rules, pays subcontractors from the same jobs, produces RCTIs and posts to your accounts, use it properly before building anything. The work described here pays off when the levy lives in a spreadsheet, rules differ by customer or contract, owner-drivers are paid outside the TMS, or the accounts are reconciled by hand. For the wider picture of transport systems, see our transport and logistics page.
Frequently asked questions
How do I calculate a fuel levy?
Agree a base diesel price, compare it each period with a published current price such as the terminal gate price, convert both to a net price excluding GST and fuel tax credits, and multiply the percentage change by fuel's share of your operating costs. Your customer agreements set the exact index, base and review period.
Is the Fair Work fuel cost recovery order in force?
Its obligations stopped applying from 5 June 2026 when diesel fell below 200 cents a litre. On 16 October 2026 the Commission said it proposes to restart them, with changes, from a date to be set, and invited submissions by 23 October 2026. Check fwc.gov.au for the current position.
Do I have to pass fuel levy increases on to owner-drivers?
While the order's obligations applied, rate adjustments had to be passed down the chain. Outside the order, it depends on your contracts. Many carriers pass some or all of the levy through. Get advice on your agreements.
How often should the fuel levy be updated?
That is set by your customer agreements. Weekly and monthly reviews are common. The Commission's October 2026 proposal would require monthly adjustments if the obligations restart.
If a diesel price change means updating spreadsheets, the TMS and RCTIs by hand, book a free initial chat. We'll tell you honestly whether your current system can do it or what is missing.