What the fuel tax hikes mean for your business and how you can beat them
We are amidst a fuel tax hike in Auckland and New Zealand as a whole. This will likely increase your business costs, so we have some tips to keep it from hurting your own pocket.
An increase in tax is what we call an ‘External Factor’ in business, meaning that it’s not something we have control over as business owners.
Rather than worry about it – we should take the initiative to find out about the fuel tax, and what can be done internally to ensure this has no negative impact. This action is something we can control.
Let’s start by looking at the fuel tax increases.
The Auckland fuel tax is an additional 10c+GST per litre on petrol, diesel and their bio fuel variants, within the Auckland Council Region. This tax comes into effect on the 1st of July, 2018.
The nationwide fuel excise will see a total increase of 10.5c per litre on petrol, with an equivalent rise in road user charges. The hike will be made in 3.5c increments over the next 2 years, starting on the 30th of September 2018. Future increases will be made in 2019 and 2020.
Now you have an understanding of the fuel tax increases coming, take a moment to consider how this will impact your business. Factors may include:
- Higher motor vehicle expense.
- Higher costs from suppliers and service providers.
- Higher freight and transport charges.
- Business customers may have higher costs and may look for alternatives.
- Consumers will also have a higher cost of living and may look for alternatives.
- Employees subject to higher personal costs.
To be a successful business owner, you need to work out how this will affect your business and ensure you have a plan in place to create a positive outcome.
Let’s look at the above factors, and see what solutions we can create for them:
Higher motor vehicle expense
The first result of increased fuel tax will inevitably be increased fuel costs. This is the perfect time to calculate how much your business spends on fuel, and how this is factored into what you charge your customer. The simple solution here is to increase what your customer pays in proportion to the increasing fuel price.
Higher costs from suppliers due to price increases (Including freight).
Many of your suppliers and service providers will be looking at increasing their prices. You don’t want to be caught blind by an increase, so contact them to see if this will happen and by how much. Much like above, ensure that you pass any additional cost onto your customer. Take the opportunity to price up alternative providers and also review the margins you’re currently making in these areas.
Not sure how to calculate what you should be charging, or how to calculate a price increase? Contact us for a free 5-hour consulting package.
Business customers may have higher costs and may look for alternatives.
Customers are going to see a rise in prices across many, if not all industries. In some instances, it will be unavoidable, however customers may look for other options. This could be an opportunity to innovate, add value, provide alternatives or variations in pricing.
Consumers will have higher costs and may look for alternatives.
Consumers will bit hit in the pocket, and may need to save money as a result. This may include looking for cheaper transport options, however many will maintain current transport and look to reduce spending elsewhere. Again, this could be an opportunity to innovate, add value, provide alternatives or variations in pricing.
Employees subject to higher personal costs.
Unfortunately, employees will feel like the losers in this situation, with little they can do about it. To work at their best, they need to feel appreciated, so this may be an opportunity to show them they are valued. A small wage/salary increase, or fuel allowance could be added to their remuneration package and factored into the company price increases. It is expected to cost the average driver an additional $250 per year.
Exemptions and rebates
There are a few specific exemptions where rebates will be provided. More information can be found at nzta.govt.nz.
Want to know more ways to improve your business? Contact us for a free 5-hour consulting package.