Freight cost guide
Fuel levy in Australia: what it means and how it is calculated
Almost every freight invoice in Australia carries a fuel levy. Here is what it is, how carriers calculate it, how it differs from fuel excise and fuel tax credits, and how to check you are being charged correctly.
- What a fuel levy is and why carriers charge it
- How the fuel levy is calculated
- What to check on every freight invoice
- How LOGIDOX checks fuel levies automatically
Fuel levy check (illustrative)
Levy recalculated
- Base freight charge
- $1,000.00
- Agreed levy rate
- 18.0%
- Levy expected
- $180.00
- Levy charged
- $195.00
- Levy applied to accessorials
- Flagged for review
Variance $15.00Held for review
Illustrative. Fields, rules and systems are configured to your process.
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The problem
A small percentage on every invoice adds up
A fuel levy is usually a percentage added to the freight charge, so it appears on almost every invoice from almost every carrier. Because the rate moves with diesel prices and each carrier sets its own, it is one of the hardest charges to check by hand.
Small errors are easy to miss and add up across thousands of invoices: an outdated rate, a levy applied to charges that should be excluded, or a levy charged twice. Checking it properly means knowing the agreed method for each carrier and applying it to every invoice.
What is a fuel levy?
A fuel levy, also called a fuel surcharge or fuel levy surcharge, is an additional charge carriers add to freight to cover changes in the cost of fuel. In Australia it is usually expressed as a percentage of the freight charge and reviewed regularly, often monthly or weekly, in line with movements in diesel prices.
Each carrier sets its own fuel levy and method, and many publish their current rate. The rate that applies to your freight, and the charges it applies to, should be set out in your agreement with the carrier.
Not to be confused with
Fuel levy, fuel excise and fuel tax credits
Three fuel-related terms that are often mixed up.
| Term | What it is | Who sets it |
|---|---|---|
| Fuel levy (fuel surcharge) | A surcharge carriers add to freight charges to cover fuel cost changes | Each carrier, under its agreements with customers |
| Fuel excise | A government tax on fuel, built into the price paid for fuel | The Australian Government |
| Fuel tax credits | A credit eligible businesses can claim for fuel tax included in fuel used in their business activities | The ATO administers the scheme |
How it works
How LOGIDOX checks the fuel levy on every invoice
The same check an auditor would make, applied to every freight invoice.
Read the invoice
Each freight invoice is read line by line, separating the base freight charge, accessorials and the fuel levy.
Apply the agreed method
The fuel levy is recalculated using the rate and method in your carrier agreement, applied only to the charges it should cover.
Flag the difference
If the levy charged does not match, the invoice is held with the variance shown, ready to approve, adjust or dispute.
Fuel levy analytics
What LOGIDOX shows you about fuel levies
Beyond checking each invoice, LOGIDOX shows how every carrier’s fuel levy behaves over time.
Carrier comparison
See what every carrier in your network charges in fuel levy, side by side, as a percentage of transport cost.
Index tracking
See whether each carrier’s fuel levy moves in line with diesel terminal gate prices (TGP), and where it drifts away.
Contract compliance
Flag invoices where the fuel levy applied doesn’t match the rate agreed with your carrier.
Pass-through speed
See how quickly each carrier raises fuel levies when diesel prices rise, compared with how quickly they lower them when prices fall.
Fuel levy vs terminal gate price
Levy drifting from the index
- Diesel terminal gate price
- Falling
- Carrier fuel levy
- Unchanged
- Pass-through
- Lagging the index
Levy varianceFlagged for review
Illustrative. Fields, rules and systems are configured to your process.
What to check on every freight invoice
The right rate
The levy rate matches the rate in force on the shipment date, not an older or newer one.
The right base
The levy is applied only to the charges your agreement says it covers.
Charged once
The levy appears once per consignment, not repeated across lines or invoices.
Consistent with the agreement
The calculation follows the method agreed with that carrier, including any caps or exclusions.
Evidence to dispute
Differences are documented with the rate, the base charge and the original invoice.
Checked on every invoice
Fuel levy errors are small individually, so checking a sample misses most of them.
What supply chain and logistics operators say
“Using LOGIDOX, we now have greater control and transparency over our freight costs, simplifying the whole process.”
Patties Foods
Head of Supply Chain
FAQs
Fuel levy, answered
What is a fuel levy?
A fuel levy is a surcharge carriers add to freight charges to cover changes in the cost of fuel. In Australia it is usually a percentage of the freight charge, reviewed regularly in line with diesel prices, and each carrier sets its own rate and method.
What does fuel levy surcharge mean?
Fuel levy surcharge is another name for a fuel levy. It is the extra amount added to a freight invoice for fuel, calculated as a percentage of the applicable freight charge under your agreement with the carrier.
How is a fuel levy calculated?
Multiply the freight charge the levy applies to by the fuel levy rate in force on the shipment date. For example, a $1,000 base charge at an 18% levy gives a $180 fuel levy. Your carrier agreement sets which charges are included and how the rate is applied.
Is a fuel levy the same as fuel tax?
No. Fuel excise is a government tax built into the price of fuel, and fuel tax credits are claimed from the ATO by eligible businesses. A fuel levy is a commercial surcharge a carrier adds to its freight charges.
Why does the fuel levy change?
Because it tracks the cost of fuel. Carriers review their fuel levy regularly, often monthly or weekly, and adjust the percentage as diesel prices move, so the rate on an invoice depends on when the freight was shipped.
How can I check the fuel levy on freight invoices?
Confirm the rate in force on the shipment date, check it was applied only to the charges your agreement covers, recalculate the amount and make sure it was charged once. LOGIDOX does this automatically on every freight invoice and flags any variance for review.
Speak to a human about freight invoice checks
Book a time with the LOGIDOX team and we will walk through how fuel levies and other freight charges are checked today, and where automation would help most.
Prefer to talk now? Call 1800 229 683 or email enquiries@logidox.ai.