Fuel Levy Surcharge

A consistent national fuel-adjustment model for the Australian fodder industry.

The Feed Standards Australia (FSA) Fuel Levy model can work with all cargo; however, it has been built specifically for hay and straw freight.

The Fuel Levy separates the agreed commercial price from future fuel-price movements. Buyers, sellers, carriers, traders and brokers can enter longer-term contracts without needing to predict where diesel prices will be in six, twelve or eighteen months.

Two-way adjustment The adjustment rises when fuel rises and falls when fuel falls, including below the base fuel price.One published reference A single weekly percentage based on the Sydney average diesel Terminal Gate Price (TGP).
Transparent contracting The underlying price is agreed separately from the variable fuel adjustment.Ready for the contractual chain A documented rise-and-fall mechanism that supports consistent fuel-cost recovery.

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The commercial problem

Why the fodder industry needs this model

Fuel is a significant component of road freight costs, but diesel prices can change substantially between the date a contract is agreed and the date the final load is delivered. This is particularly important in the fodder industry, where supply contracts may continue for more than twelve months.

Without an agreed adjustment mechanism, someone must carry the fuel-price risk. Sellers may build a contingency into delivered pricing. Carriers may quote conservatively or avoid longer-term work. Buyers may pay for a fuel increase that never occurs. Alternatively, the parties may be forced to renegotiate after the contract has commenced.

The purpose of the FSA Fuel Levy

Feed Standards Australia developed the model after considering fuel-adjustment approaches used in general, grain, livestock, machinery and other industries. Its purpose is to provide the fodder industry with one practical, transparent and two-way method of managing fuel-price movements.

Feed Standards Australia maintains the industry model and publishes the weekly fuel adjustment. It does not arrange the freight, invoice the adjustment or receive revenue from it. Participating businesses adopt the model within their own commercial contracts. Feed Central Trading will apply and administer it through its contracts and automated invoicing system.

The model does not predict or fix fuel prices. It establishes the method the parties will use when fuel prices change. The underlying commercial terms can be agreed at the start, while the fuel component adjusts independently over the life of the contract.

Example: a 500 km road train at $8/km has a base freight of $4,000. With an FSA Fuel Levy of 20.37% (21–27 Sep), the fuel adjustment is +$814.80, giving adjusted freight of $4,814.80 per load, or +$8,148 across 10 loads. The adjustment is two-way: fuel up means freight up, fuel down means freight down.

Supporting long-term fodder contracts

The principal benefit is confidence. Parties do not need to agree today on what diesel will cost months into the future. The contract records the underlying price, and the published weekly fuel adjustment deals with future movement.

  • Sellers can price fodder without carrying speculative fuel risk.
  • Carriers can bid excluding the levy and compete on their underlying freight rate.
  • Buyers receive reductions when fuel falls and pay only a proportionate fuel adjustment when it rises.
  • Traders and brokers can administer contracts without repeated freight renegotiations.

Why the adjustment can go below zero

The levy is a true up-and-down adjustment against the base fuel price, rather than a surcharge that only ever adds cost. The carrier is compensated as fuel costs rise, and the buyer receives a corresponding reduction as fuel prices fall.

One model, shared confidence

Benefits across the supply chain

Buyers Secure longer-term fodder supply with a verifiable adjustment. Receive reductions when fuel falls and pay only a proportionate fuel adjustment when it rises.Sellers Agree the fodder price and base freight without forecasting diesel. Protect the sale from unexpected fuel movements and avoid repeated price negotiations.
Transport companies Bid for work excluding the fuel adjustment. Commit capacity to longer-term contracts without carrying the full risk of future fuel-price increases.Traders and brokers Use one framework in quotations, contracts and invoices. Reduce disputes, compare freight offers consistently and maintain a clear calculation record.

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Better freight bidding

Under the model, carriers bid their underlying freight rate excluding the FSA Fuel Levy. They do not need to guess the future diesel price or include a large fuel contingency. The same published adjustment can then be applied to competing bids.

This produces a more meaningful comparison of freight offers. It also means sellers do not need to charge today for a possible fuel increase that may never occur, while carriers are not asked to gamble on future diesel prices.

Carrier bidWithout a common modelWith the FSA model
Fuel assumptionEach carrier forecasts independentlyExcluded from bid; one weekly fuel adjustment applies
What carriers compete onRate plus differing fuel contingenciesEfficiency, service, equipment, capacity and value

Compliance

Supporting RTCCO compliance

The Road Transport Contractual Chain Order – Fuel Cost Recovery 2026 demonstrated that responsibility for fuel-cost recovery can extend beyond the transport company. A contractual chain may include buyers, sellers, traders, brokers, transport businesses, subcontractors and regulated owner-drivers.

The legal position depends on the actual contracts and arrangements in the chain, not simply the label used by a business.

What the 2026 Order required

While its fuel cost recovery obligations operated, affected primary and secondary parties were required to adjust rates regularly to compensate for increased fuel costs. Primary parties could also be required to take reasonable steps to ensure appropriate adjustments reached affected contractors and workers further down the chain.

The Fair Work Ombudsman states that existing rise-and-fall arrangements could satisfy the requirements where they adequately managed fuel-price changes.

How the FSA model helps

  • Establishes an agreed fuel-price reference and base price.
  • Provides one calculation method and a documented weekly adjustment.
  • Creates a mechanism for fuel changes to pass through connected contracts.
  • Produces records showing how the adjustment was calculated.
  • Avoids having to negotiate a new mechanism after fuel has already increased.
A mechanism for compliance – not an automatic guarantee Each affected party remains responsible for applying the adjustment correctly, passing it through where required, taking any necessary reasonable steps and retaining appropriate records.

Current status

The fuel cost recovery obligations under the 2026 RTCCO stopped applying from 7 June 2026, although the Order itself remains in effect. A standing contractual mechanism leaves the industry better prepared for future fuel movements and any applicable contractual-chain obligations.

General information only: RTCCO responsibilities depend on each party’s specific arrangements. Parties should obtain advice where needed.

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Practical guidance

Frequently asked questions

Is this simply an additional freight charge? No. It is a two-way adjustment. It may increase, reduce or have no effect on the underlying freight rate.
Can the levy be negative? Yes. When the Sydney TGP is below $1.62/L, the adjustment is negative and reduces the freight amount.
Does it change the fodder price? No. The adjustment applies to the underlying freight component, not to the agreed ex-farm value of the fodder.
What happens across several delivery weeks? Each load uses the FSA levy for its delivery week, so adjustments may differ across the contract.

References