Australia’s fuel tax credit scheme is costing taxpayers an estimated AU$30 million a day, according to newly cited budget figures, fuelling debate over whether the long-standing policy should be scaled back as the government pursues its climate and fiscal objectives.

The scheme allows businesses — primarily in sectors such as mining, agriculture and transport — to claim credits for fuel excise paid on diesel and other fuels used off public roads.

Originally designed to prevent double taxation and support regional and resource industries, the measure has grown into one of the most expensive federal programs outside health and social services, with annual costs running into the tens of billions of dollars.

Recent Treasury data show the total value of fuel tax credits has surged in line with higher global energy prices and strong commodity production, pushing daily costs to roughly AU$30 million.

Analysts note that the bulk of claims are made by large mining companies operating heavy machinery off-road, particularly in Western Australia and Queensland.

The scale of the expenditure has prompted renewed scrutiny from economists, environmental advocates and some policymakers who argue that the scheme effectively subsidises fossil fuel consumption at a time when Australia is seeking to cut emissions and accelerate the transition to cleaner energy.

They contend that winding back or reforming the credits could deliver substantial budget savings while aligning fiscal policy more closely with climate commitments.

Industry representatives, however, maintain that the credits are not a subsidy but a rebate that ensures fuel used in off-road operations is not subject to road-related excise.

They warn that abrupt changes could increase operating costs, reduce international competitiveness and place pressure on regional employment.

The debate comes as the federal government balances efforts to repair the budget with its pledge to reach net-zero emissions by 2050. While no formal proposal to abolish the scheme has been introduced, senior figures have acknowledged that all major expenditures are under review as part of broader tax and spending discussions.

Any move to substantially alter the credits would likely require careful consultation with industry and states, given the policy’s deep integration into Australia’s resource-driven economy.