“It is not just the cost of fuel that is increasing, but also the cost of groceries. These items are generally not discretionary and the Australians who are feeling the most pain are low-income earners,” said Susan Franks, Senior Tax Advocate at CA ANZ.

“Cutting fuel excise won’t necessarily result in lower prices at the pump and reduces incentives to transition to net zero.

“Australia is a price taker when it comes to fuel and there is no guarantee that any cost reduction will be passed onto consumers.”

Increasingly frequent floods and bushfires mean that Australians have already been dealing with the consequences of climate change and removing one of the few taxes imposed on the use of fossil fuels is inconsistent with Australia’s transition to net zero emissions, says Franks.

“History tells us that it would be politically difficult to subsequently reinstate the $12B fuel excise, thus cutting fuel excise could result in a permanent reduction in revenue for what may be a temporary problem. A cost that Australia, with a budget in deficit and nearly a trillion in debt, can’t afford,” said Franks.

“Direct relief payments would be far more efficient in assisting Australians with their hip pocket pain today and allows them to spend money on items that they need – not just petrol.

“During COVID, the government made a one-off $750 payment to welfare and recipient households. A similar payment (with potentially a broader base) would provide temporary relief to people who are struggling with the current unexpected increase in the cost of living.

“A one-off payment is a temporary solution to what may be a temporary problem. It buys more time for the Government to determine the future global and Australian economic outlook without permanently altering mechanisms which would reduce revenue and make our transition to net zero emissions harder.

"There’s no doubt the Government needs to respond to household cost pressures in the upcoming budget. However, adjusting or freezing the fuel excise is not the solution.”

CA ANZ also noted the impact higher petrol prices might have on car expense tax deduction claims.

“Those who drive for genuine work or business purposes may be thinking of switching from the ATO’s statutory deduction method of 72 cents per km to the so-called logbook method which allows claims for actual fuel costs.”

To work out your work-related use, you need a valid logbook and the odometer readings for the start and end of a continuous 12-week logbook record-keeping period, says Franks.