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NZTA RUC Q&A
What is RUC and what is it used for?
Road user charges (RUC) is a tax that is paid by all vehicles over 3.5 tonnes and all diesel vehicles, for the use of the road. Petrol vehicles pay for their road use through fuel excise duty. There is no excise duty on diesel.
All revenue from RUC goes into the National Land Transport Fund. The fund is used mainly for road construction and maintenance, along with other land transport activities benefiting road users.
RUC rates are set according to vehicle types and weights and vary in proportion to the effect different vehicles have on roading network costs such as damage to road surfaces.
National Land Transport Programme expenditure 2009-2012
State Highways: 53%
Local Roads: 22%
Road Policing: 10%
Public Transport: 10%
Other: 5%
Why is new RUC legislation needed?
The underlying RUC system has not been changed since 1978 so it needs to be brought into the 21st century. The new legislation will:
- modernise and simplify the RUC system through a new approach to calculating RUC licence weights and discontinuing time licences
- remove a form of evasion which will give the system greater integrity and reduce RUC revenue leakage
- provide for an improved regulatory framework to enable the adoption of modern technology in a considered fashion
- provide for a fairer and simpler structure in relation to offences and penalties.
Overall the legislation will be designed to achieve fairness and efficiency (including reduced compliance costs) for road users.
What are the proposed changes to the RUC legislation?
- Change to the definition of licence weight – definition of vehicle weight for the purpose of RUC licences will be changed from actual gross weight to a definition based on maximum permissible on-road weight.
- Reform of the time licence system and modernisation of the list of exempted vehicles – the time licence system will be discontinued and some selected vehicle types will instead pay a flat rate annual charge.
- Improve the regulatory framework for electronic management systems by:
- rationalising approval processes for electronic service providers
- authorising monitoring of these providers
- setting rules around access to information held by the providers.
- Improve RUC compliance through:
- more stringent regulations around odometer tampering
- transport service operators being required to keep RUC records
- the government having assessment powers similar to those available in relation to other forms of taxation
- the assessment powers being accompanied by safeguards that prescribe the powers and duties of government officials and give RUC payers review and appeal rights
- vehicle inspectors being required to report odometer readings to the NZTA as part of WoF/CoF inspections and NZTA using those readings to check RUC
- updated offences and penalties, with a fairer regime especially for light diesel vehicles
- virtually eliminating weight-based RUC evasion.
What legislation will these proposed changes affect?
The Road User Charges Act 1977 and the Road User Charges Regulations 1978 will be replaced with a new RUC Bill and Regulations.
What are the benefits to those who pay RUC from the proposed changes?
The proposed changes are intended to result in a RUC system that is more modern, simpler and fairer. The changes will in turn make administering and complying with the system more cost effective and efficient.
Fairness
RUC evasion is conservatively estimated by officials at $30 million a year for heavy vehicles alone. This means honest payers of RUC are subsidising those who evade payment. Modernising and simplifying the system will remove some opportunities for evasion and will encourage timely payment.
Simplification
Changing the definition of licence weight, removing time licences and simplifying the list of exempted vehicles will all reduce compliance costs for businesses and simplify administration processes for industry and government.
Modernisation
When the changes are in law the NZTA will be able to update RUC payment channels and administer the RUC system more efficiently.
How will these proposed changes affect businesses’ costs?
The changes to the system will mean vehicles that are similar will pay similar levels of charges. Heavy vehicles as a group will continue to pay the same amount as at present, covering the road damage they are responsible for. The changes will also encourage the most efficient use of these vehicles.
There will be time savings for all transport business operators through the simplification of RUC licence purchases and less complex roadside enforcement checks.
Some operators will find that their RUC payments increase as a result of the change, while others will see a decrease, depending on the nature of the loads they carry and their choice of vehicle. The marginal changes are however likely to be relatively small compared to total truck operating costs and the change should affect all operators who carry similar loads equally.
Who has been consulted on these proposed changes?
The Ministry of Transport has consulted organisations representing road users and other interested stakeholders on the proposals. The majority of stakeholders support the removal of operator nomination of RUC licence weight.
Further consultation will take place with stakeholders on the definition of vehicle types and weight bands, before drafting the new Regulations.
When will the new Bill be introduced into Parliament?
The Minister of Transport intends to introduce a new RUC Bill to Parliament in 2010.
When will the changes come into effect?
This depends on when the Bill is passed. It is currently expected that the Bill will pass in early 2011 and that changes will come into effect a year later. This allows time for consultation on the detail to be included in Regulations, and for the NZTA to make the necessary changes to administrative and IT systems.
Vehicle weight definition
What is the proposal for new licence weight definitions?
That the definition of vehicle weight for the purpose of RUC licences be changed from actual gross weight to a definition based on maximum permissible on-road weight. For light vehicles and smaller trucks this will usually be the manufacturer’s maximum gross weight rating, while for larger trucks it is likely to be the maximum weight allowable for vehicles of that type under the Vehicle Dimensions and Mass Rule 2002.
Why is the licence weight definition being changed?
The proposal for changing the definition of licence weight will greatly simplify administration for both industry and government agencies.
Currently a vehicle operator has to estimate the actual gross weight to be carried by a vehicle during the journey. It can be difficult to predict the weight to be carried in advance and scales are not always available at loading sites. It is also difficult to recover outstanding RUC by making an after-the-event assessment of weight.
It also means that because each vehicle will now have a set weight it will close the door on the potential for avoiding the payment of the correct amounts by purchase of under-weight RUC licences.
How will the weight definition be applied in practice?
The definition of weight for RUC licence purposes in the RUC Act will be changed to a new “RUC weight”, based on the lesser of either:
- manufacturer’s specified gross vehicle mass
- gross vehicle mass under the Vehicle Dimension and Mass Rule 2002 (the VDAM Rule).
How would unlawful loadings be dealt with?
Any unlawful overloading of vehicles will be addressed under the Vehicle Dimensions and Mass Rule 2002 and the Land Transport Act 1998.
Will this have any impact on light diesels (under 3.5 tonnes)?
The new definition of weight will have no significant impact on the amount of RUC payable for light vehicles.
What will happen to supplementary licences?
Supplementary licences enable operators to increase the licence weight of their vehicles for short distances.
The proposed RUC weight definition makes this provision redundant in most circumstances. Additional payments are likely to still apply for vehicles that are issued with permits to operate above their normal gross mass under the Vehicle Dimensions and Mass Rule 2002.
Time licences
What are time licences?
A small number of vehicles (various construction, forestry and road maintenance related heavy machinery, unregistered motor vehicles operated under trade plates and some tractors) currently purchase time licences to travel on the road for a certain period of time.
Distance licences are inappropriate for these vehicles as most cannot easily be fitted with distance recorders and/or travel on the road infrequently.
Some vehicles are exempt from RUC – farmers’ tractors, forklifts and vehicles used for agricultural purposes. While they use the road occasionally their travel is assumed to be very limited.
How many diesel vehicles require time licences?
Of the 580,000 RUC paying vehicles approximately 7,500 (just over 1 percent) currently require time licences.
How much revenue do time licences generate?
Approximately $2 million a year.
Why do time licences need to be removed?
The time licence system is costly to administer and adds unnecessarily to the complexity of the RUC system. It is also difficult to objectively set a fair charge for time licences.
In many cases the distinction between vehicles subject to time licences and those that are exempt is arbitrary and unclear.
How will these proposed changes affect the list of exempted vehicles?
The majority of vehicles now subject to time licences will become exempt.
There will be greater clarity in the definition of vehicles qualifying for exemption from RUC. Officials will consult with industry before finalising a revised and consolidated list of exempted vehicles.
What is proposed to replace time licences?
For certain vehicles, mainly tractors, which are used at least occasionally on the road, the standard annual licence fee (currently $43.50) would be recognised as an appropriate contribution to road costs.
Time licences for other vehicle types that at present are subject to higher time licence charges, would also be removed, but replaced by a new one-off charge to be paid at the time of annual licensing.
There will be consultation with users on the detail of these changes before the regulations defining the different categories of vehicle are made.
To help prevent gaming of the system officials will also review the legal definition of a “tractor” and associated rights and responsibilities and report back on suggested changes.
Electronic RUC regulatory framework
What is electronic RUC?
Road User Charges Regulations were amended in 2009 to allow for the use of electronic distance recorders and electronic display of RUC licences, as a voluntary alternative to mechanical hubodometers and paper RUC licences.
Why is an improved regulatory framework for electronic RUC required?
While amending RUC regulations was a necessary first step, RUC legislation needs further updating to ensure the successful introduction of this technology and ongoing administration of independent electronic system providers.
As third party electronic system providers carry out some administrative functions of the RUC system on behalf of their customers and act as a representative of the NZTA for the issuing of RUC licences, it is important that these agencies be monitored and audited under a consistent statutory framework.
What changes are proposed to improve the regulatory framework for electronic RUC?
The proposed changes will introduce:
- one application process for electronic system providers that covers both the authority to issue RUC licences and electronic distance recorder approval
- a monitoring framework for providers
- a statutory requirement for providers to keep certain information rules around access to information held by providers.
Improving compliance
Why does RUC compliance need to be improved?
RUC evasion is conservatively estimated at $30 million a year, for heavy vehicles alone. This means that honest payers are subsidising those who evade payment and the government is not able to collect revenue to invest back into the transport system.
The new proposed system will remove opportunities for evasion and encourage timely payment.
What are the proposals to improve compliance?
- More stringent regulations around odometer tampering
- Transport service operators being required to keep RUC records
- The government having assessment powers similar to those available in relation to other forms of taxation
- Assessment powers will be accompanied by safeguards that prescribe the powers and duties of government officials and give RUC payers review and appeal rights
- Vehicle inspectors being required to report odometer readings to the NZTA as part of WoF/CoF inspections and NZTA using those readings to check RUC
- Updated offences and penalties, with a fairer regime for light diesel vehicles.
What records will operators be required to create and retain?
Operators will be required to create and retain records for seven years relevant to compliance with the RUC Act.
Where a transport service operator is already required to keep log books they must be retained for three years from the date of their last entry.
Penalties will be put in place for not making, retaining or producing the required records.
It is also proposed that in situations where operators have not kept records the Chief Executive of the Ministry of Transport will be permitted access to third party business records of parties involved in the transport of goods.
What other proposed changes will improve compliance and assist enforcement?
It is proposed that the Police power to remove tampered hubodometers for the purposes of any criminal proceedings be extended to include faulty, inaccurate or obscured hubodometers or hubodometers with no serial numbers, carrying common serial numbers or where the number is obscured.
Police will also have the power to apply for a search warrant in cases where they have good reason to suspect a RUC offence that would attract a financial penalty of more than $15,000 in the case of an individual and $75,000 for a corporate.
It is proposed that legislation include the provision to waive a RUC debt if the Ministry of Transport is satisfied that the person legally liable was not the person responsible for incurring the debt.
Background questions and answers
How is RUC collected?
RUC is collected by the NZ Transport Agency directly and via its agents. It is payable in advance in units of 1,000 kilometres and the maximum kilometres shown on the licence must not be less than the reading on the vehicle’s odometer (or hubodometer for vehicles over 3.5 tonnes).
How do these proposed changes relate to the independent RUC review?
In August 2008 the previous Minister of Transport established an Independent Review of the New Zealand Road User Charging System (the Review). This was in response to concerns raised by the road transport industry about the increase in RUC rates on 1 July 2008. The increase was implemented without notice and had not been expected by the industry.
The Review group reported back in March 2009. It recommended improvements in two broad areas, the cost allocation model and administrative improvements to simplify and modernise the RUC system. Cabinet accepted the Minister of Transport’s recommendation that the RUC system be retained, simplified and modernised, rather than replaced with a diesel tax. Of the recommendations that were accepted some will be implemented administratively and others will require legislative change.
The changes that are part of this announcement relate to those recommendations accepted by the government that involve legislative change.
Why RUC rather than a diesel tax?
The Review considered this option carefully, but recommended that, on balance, the existing RUC scheme should be retained rather than introducing a diesel tax. This was agreed by the government.
It is estimated that 36 percent of diesel is used in industries such as construction and fishing, and for other purposes unrelated to road transport. It would not be an equitable system to make non-road users pay a tax that is to the benefit of road users, therefore a refund system would have to be set up. This would involve significant administrative costs and compliance costs for people outside the transport sector.
Any refund system would be complex to administer and potentially susceptible to fraudulent claims.
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