‘Just like getting a Netflix bill’: How the new road user charge system will work

Thursday, 7 August 2025

Petrol tax will be abolished, and drivers will pay based on how much they travel.

Transport Minister Chris Bishop made what will be the biggest change to how the roading network is funded in 50 years on Wednesday.

The new system is likely to be in place by 2027 and is expected to affect the owners of 3.5 million light vehicles.

These were some of your questions, and everything we know so far.

How will your kilometres be tracked?

The system will work by distance tracking through app-based technology linked to your vehicle. Some modern vehicles already have this technology.

Currently most road user charge vehicles run off a paper-based system but some vehicles already use an electronic system, which is what Bishop wants everyone to be on.

A private operator would run the technology but Bishop said the Government would set the standards. The Privacy Commissioner would be involved and Bishop acknowledged concerns about tracking of vehicles.

There were a range of privacy issues that people would have legitimate concerns about.

”Other countries have done this, you know, we’re like miles behind other parts of the world on this … and they’ve been able to grapple with those issues,” Bishop said on Wednesday.

He suggested that the Government would be agnostic to what technology was used to monitor road user charges, opening up the possibility of more market-driven solutions and competition.

As The Post’s Luke Malpass noted, it could be something akin to Sydney’s e-tag system.

Bishop theorised vehicle owners would get a bill at the end of the week or the month for the distance they had travelled, like “your monthly Netflix bill”.

Why are we doing this?

Bishop added that it wasn’t about “revenue raising” but maintaining the National Land Transport Fund which maintained roads. Since the uptake of electric and hybrid vehicles, it no longer made sense to link petrol consumption with road usage.

“It isn’t fair to have Kiwis who drive less and who can’t afford a fuel-efficient car paying more than people who can afford one and drive more often.”

Part of the reason for the change was the “complicated debate” about how much hybrid vehicle owners paid. Bishop said the amount set would depend on the vehicle to create a “fairer” system.

“If we get this right, people will pay based on their vehicle type, the distance travelled, the location, and the time of use,” he said.

In comments to The Post, Bishop said that while petrol tax had long been a “proxy” for road usage, that relationship was “fast breaking down”.

“As our vehicle fleet changes, so too must the way we fund our roads.”

How much is it going to cost?

Nonetheless, AA principal advisor Terry Collins told The Post there would be winners and losers as a result of the change.

Fuel tax adds about 70c a litre at pump. According to Gaspy, the average price across New Zealand right now is $2.50 a litre, which means, if implemented today, you could expect a reduction down to about $1.80 a litre - which is about what diesel costs on average.

Currently, road user charges cost - at a minimum - $76 plus an administration fee of about $12 per 1000km. Any private company involved in the system will want to turn a profit, but it’s not yet possible to know what that might look like or if it will mean higher or lower fees. Put another way, a driver of a light vehicle pays about 7.6c a kilometre.

Collins said that petrol was cheaper than diesel, but people had become used to paying more for it because of the additional taxes .

“One of the biggest winners is going to be the owners of pleasure boats; all those guys who have outboard motors that have been paying petrol tax for the road user charges won't be paying it any more,” he said.

“Everybody who runs a petrol motor on an outboard boat hasn't been able to get that money back. Now they'll benefit from it. So boating will become cheaper.”

On the flipside, people who had opted for more fuel efficient or smaller vehicles would be pinged the same as someone “driving a 5 litre Mercedes V8”.

“One of the incentives about high fuel prices was it encouraged people to move to smaller, more efficient vehicles. Without that incentive any more … somebody who wants to run a V8 will be paying the same cost as somebody who wants to run a 1.1 litre turbocharged, little efficient motor.”

However, it’s not yet known whether the cost of running a petrol vehicle will be overall cheaper once the taxes are removed and road user charges rolled out. In part, that’s because there are various factors at play - including the car you drive and how you drive it.

If he had to guess, Collins reckoned it would be a little pricier for the average Kiwi.

“If you look back in history, they set the road user charges at a time based on what you were paying for your fuel excise duty tax,” Collins said.

“Because if you think about all those boaties [who] have been paying for the road - so all that charge has to now be divided amongst the remaining vehicle fleet. There's an adjustment that needs to be made. How many vehicles, how far they're going to travel, and how much do we need? They're kind of the three inputs that they're going to look at.

“So if you ask me there's going to be up or down? Well, I don't know, but I suspect that that formula has got to mean, when we look at the price of our roads, is that we're probably going to have to pay a bit more.”

Bishop, in a statement to The Post, said it was “too early” to comment on the specific rates that might apply under a new system.

“The change won’t come in until 2027 or even later, which is a deliberate choice to give us time to work through this carefully to ensure we get it right,” he said.

“What users will pay is a key decision being worked through as part of the fleetwide transition to electronic road user charges.”

What if you don’t pay your bill?

There are already penalties in place for operating a vehicle without a proper distance recorder, for going above the distance specified or not paying your road user charge. The fine is $200 plus a 10% penalty on the unpaid amount.

Road user charges were introduced for electric vehicles in April last year and by May 31 the Herald later reported that 12,000 electric vehicle owners had failed to pay their first road user charges by the deadline.

At that time the New Zealand Transport Agency said in 2023 about 5000 road user charge fines were issued.

Collins said it was unclear, if you didn’t pay your RUC, who you owed the debt to.

“If it's a private collecting agency, is the debt owed to them or is the debt owed to the crown? Until we get the optics over the whole plan and we pull it apart, it's a bit hard.”

What if the cost of petrol goes up?

A spokesperson for Z Energy said the company was “committed” to ensuring customers received a fair deal at the pump. That meant passing on benefits to drivers.

“Currently, [fuel excise duty] is a tax collected by Z on behalf of the Government — Z does not retain any portion of this tax,” they said.

“However, it’s important to note that fuel prices are influenced by multiple factors, including global import costs, which cannot be predicted in advance.

“The details of how this transition occurs is important and while acknowledging these changes are several years away we look forward to receiving the detail of these changes in due course.”

What next?

A whole lot of legislative changes now need to be made.

That includes, removing the requirement for paper RUC licences and enabling electronic licences, supporting flexible payments, and separating NZTA’s role as regulator and retailer.

New legislation is expected to be passed next year.