New Zealand is set to overhaul how it funds its roads, replacing the long-standing petrol tax with an Electronic Road User Charges (RUC) system for all light vehicles. Transport Minister Chris Bishop says the change will be the biggest shift in road funding in 50 years.
Currently, drivers of petrol cars pay about 70 cents per litre in Fuel Excise Duty (FED) whenever they fill up. This money goes into the National Land Transport Fund to build and maintain roads. Diesel, electric, and heavy vehicles already pay RUC based on distance travelled.
Mr Bishop said the link between petrol use and road funding is breaking down.
“For decades, petrol tax has acted as a rough proxy for road use, but the relationship between petrol consumption and road usage is fast breaking down,” he said.
He noted that fuel-efficient and hybrid cars are becoming more common, which means some drivers contribute less to road costs despite travelling similar or greater distances. In 2015, there were 12,000 hybrids on New Zealand roads; today there are more than 350,000.
Fairer System for All Vehicles
Under the government’s plan, all vehicles – petrol, diesel, electric, and hybrid – will eventually pay based on the actual distance travelled and vehicle weight.
“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,” Mr Bishop said.
The shift will start with legislative and regulatory reforms to modernise the current RUC system and allow private sector companies to provide easier, more innovative payment options.
Key Legislative Changes
The government is progressing several reforms, including removing the need to carry or display a physical RUC licence, replacing it with digital records and allowing more types of electronic RUC devices, including those built into modern cars.
The proposed reforms also include supporting flexible payment options such as post-pay and monthly billing, separating NZTA’s roles as RUC regulator and retailer to improve competition, and bundling road charges, such as tolls, into a single payment.
“Eventually, paying for RUC should be like paying a power bill online, or a Netflix subscription. Simple and easy,” Mr Bishop said.
Rollout Timeline
Legislation is expected to pass in 2026, followed by an updated Code of Practice for RUC providers. That same year, the government will work with the market to assess technology solutions and timelines. NZTA and Police will also upgrade their enforcement systems.
By 2027, the RUC system will be open to third-party providers offering innovative payment services. However, no date has been set for the full transition of the light vehicle fleet.
“That’s a deliberate choice, as we’re focused on getting the system right rather than rushing its rollout,” Mr Bishop said.
“This is a once-in-a-generation change. It’s the right thing to do, it’s the fair thing to do, and it will future-proof how we fund our roads for decades to come.”
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