What the loyalty tax is
The "loyalty tax" (or loyalty penalty) is the gap between what a long-standing customer pays and what a new customer pays for the same energy. It builds up quietly. Retailers compete for new customers with sharp prices and introductory discounts, then prices rise, discounts end, and the customer who never switches drifts onto rates well above what the same retailer is offering newcomers.
The ACCC has found that households and small businesses who have stayed with a retailer for a couple of years are often paying hundreds of dollars a year more simply for their loyalty. Consumer groups estimate more than a million households are affected. They are disproportionately older and lower-income households, the people least likely to switch.
What changed on 1 July 2026
A national rule made by the Australian Energy Market Commission took effect on 1 July 2026 in NSW, Queensland, South Australia, the ACT and Tasmania. It limits the loyalty tax in three ways:
- No more than the standing offer after a benefit ends
- When the benefits on your plan change or expire, your retailer cannot charge you more than its standing offer price. Previously, an expired discount could leave you paying above it.
- One price rise a year
- A retailer can raise prices on a market plan only once every 12 months: within July for most customers, or no earlier than the contract anniversary for plans with a fixed-price period. Cuts to feed-in tariffs are limited the same way.
- Old conditional discounts applied in full
- Some older contracts carried large discounts that only applied if you paid on time or by a certain method. On those contracts, the discount must now be applied in full whether or not you meet the condition.
Victoria went further
In July 2026 Victoria banned the loyalty tax outright. Retailers must identify customers who have been on the same plan for more than four years, and move any who are paying too much to a lower price set at the Victorian Default Offer. They have until 30 June 2027 to complete the switch, and face penalties for each breach.
Nationally, the AEMC’s 2026 pricing review considered a ban and stepped back from it, recommending instead that retailers tell customers how much more they are paying. Consumer groups called that a missed opportunity. Separately, from 30 December 2026 retailers must carry their "better offer" message (telling you whether another of their own plans would save you money) into the messages sent with your bill, not just the bill itself.
Why the rules do not fully protect you
The standing offer is a ceiling, not a good deal. It is the price the rules use as a backstop, and most market plans undercut it. Capping you at the standing offer stops the worst outcomes but can still leave you well above the cheapest plan at your address.
The "better offer" message only compares your retailer’s own plans. A bill that says you are on their best plan tells you nothing about the rest of the market. And Victoria’s ban moves long-standing customers to the Victorian Default Offer, which again is a reference price, not the cheapest plan available.
How to tell if you are paying it
- Find when you last chose your plan. If it was more than a year or two ago, or you cannot remember, assume you may be paying it.
- Look at the front of your latest bill for the "Could you save money on another plan?" message. If it says yes, you are paying more than you need to, even with your own retailer.
- Compare your plan’s whole-year cost on your usage with the plans available at your address now, from every retailer, not just your own.
- If there is a meaningful gap, switch, or ask your retailer to move you to their best current offer. Switching is free on most plans.
Stop it coming back
The loyalty tax is not a one-off. It rebuilds every time prices reset or a discount ends. Checking once a year helps; checking whenever something changes is better. See how often to switch.
EnergySorted re-costs every plan at your address against your real usage every night and emails you when one beats your plan by enough to matter. We do not take commissions, so the cheapest plan for you is the one we show first, and if you are already on it, we say so. Check a bill free.
Frequently asked questions
What is the energy loyalty tax?
The extra amount long-standing customers pay compared with new customers for the same energy, usually because prices rose or discounts ended while they stayed on an old plan.
Has the loyalty tax been banned?
In Victoria, yes, from July 2026: retailers must move customers on plans older than four years who are overpaying onto a lower price, by 30 June 2027. Nationally it has been limited, not banned.
What changed nationally on 1 July 2026?
Retailers can no longer charge you more than their standing offer after your plan’s benefits end, can raise prices only once every 12 months, and must apply certain old conditional discounts in full.
How much is the loyalty tax?
The ACCC has found long-standing customers are often paying hundreds of dollars a year more. Your own figure depends on your plan and usage. Compare your plan’s whole-year cost with what is available now.
Is the standing offer a good price?
Usually not. It is a regulated backstop, and most market plans are cheaper. Being capped at it protects you from the worst prices, not from paying more than you need to.
My bill says I am on my retailer’s best offer. Am I safe?
Only within that retailer. Other retailers may have cheaper plans at your address, so compare the whole market.
Will my retailer move me automatically?
In Victoria, customers on plans more than four years old should be moved by 30 June 2027. Elsewhere, generally not. You have to ask or switch.
How do I avoid the loyalty tax?
Re-check your plan whenever prices reset or a discount ends, and switch when there is a meaningful saving. EnergySorted can watch the market for you every night.