National campaigned on scrapping the tax - of 11.5 cents per litre of fuel including GST - within its first 100 days.
"Since 1 July 2018, Aucklanders have faced an additional 11.5 cents per litre tax on fuel, over and above what the rest of the country pays, increasing the cost of living at a time when they can least afford it," said Transport Minister Simeon Brown during the announcement with Luxon in Auckland.
"Ending this tax is one way to reduce the price of fuel and ease some of the financial pressure facing households in our largest city.
“Removing this extra tax of 11.5 cents per litre on petrol and diesel means the driver of a Toyota Hilux will save around $9.20 every time they fill up, while a Toyota Corolla driver will save around $5.75."
The tax was introduced by the Labour government in 2018, to be paid by fuel distributors for fuel stations and commercial users in the Auckland region, with the aim of funding transport projects that otherwise would take longer or not take place.
The funding is collected by NZ Transport Agency Waka Kotahi then is sent on to Auckland Council minus a service cost.
National had argued the funds from the tax were largely not being used, with more than $327 million of the $700m taken remaining unused by May last year.
"Fuel tax is becoming an increasingly regressive form of taxation and costs people on lower incomes with less fuel-efficient vehicles more than those who have newer more fuel-efficient vehicles," Brown said.
However, Auckland Mayor Wayne Brown has said while the tax should be scrapped, that should only be as part of a plan to replace the revenue with other fund-raising measures like congestion charging.
In August, he said removing the regional fuel tax without a replacement could leave a $2 billion gap in the council's budget, and urged the government to work with local government rather than dictating to the council.
"It will mean more delays to sensible projects to optimise our road network and more potholes," he said at the time.
The tax applies to petrol, diesel, a biofuel variants and had been due to expire on 30 June 2028.
Some uses of fuel - for commercial, charity and government organisations using machinery and search and rescue vehicles, or international vessels including superyachts, for example - were eligible for rebates.
