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What is the loyalty tax (and how to stop paying it)

Editor Team · Updated

Short version

The "loyalty tax" is not a real tax. It is the extra you can end up paying when you stay on an old plan while newer customers get better prices. For electricity, the ACCC has put a number on it. For mobile and NBN, we have not found a current official figure, so we won't invent one. The fix is the same everywhere: check your plan once or twice a year, and know what you'd be moving to.

What the loyalty tax means in Australia

Regulators sometimes call it the "loyalty penalty". A provider advertises a sharp price or a discount to win you over. Later the discount ends, or newer plans get cheaper, and you stay on the old rate because nothing prompts you to look.

Nobody has to do anything dodgy for this to happen. Often it is just inertia. That is why the cure is a habit, not a rant.

What the ACCC found for electricity

According to the ACCC, households on electricity offers more than a year old paid $238 a year more, on average, than households on newer offers, and the gap grew as offers got older. The ACCC also said more than 80 per cent of households in the National Electricity Market could move to a cheaper plan by shopping around (ACCC — No reward for being loyal).

Later reports show the picture moves. According to the ACCC's December 2025 report, the penalty has fallen, partly because rising prices have narrowed the gap between older and newer plans, but 36.5 per cent of customers, nearly 2.5 million, still pay at or above the default offers (ACCC — Inquiry into the National Electricity Market, December 2025).

Treat these as electricity-only numbers, for the years stated. They don't tell you what a mobile or NBN customer is paying.

Why discounts expire

Many energy plans carry a "benefit period", often a discount for a set time. Once it ends, the contract usually carries on at the same prices without the benefit. Energy Made Easy — Benefit periods and contract terms explains this, and notes that an exit fee may apply if you leave during the benefit period.

Some discounts also depend on conditions, such as paying on time. Energy Made Easy — Energy plan discounts and fees covers how those work. A headline discount is only worth what you can actually keep.

Mobile: what to check before you switch

The ACMA says that once your contract ends you can keep paying and stay on the same plan, but that isn't always the best option (ACMA — Understand your phone or internet contract).

NBN: what to check

  • Check whether you're in a contract or have an exit fee, using the same ACMA page as above.
  • Work out which speed tier you really need. The ACCC notes that many people may get better value from cheaper, lower-speed plans depending on their needs (ACCC — Communications market report 2024–25).
  • Compare the typical evening speed on offer, not only the headline speed. The ACCC's broadband speed claims guidance is the standard providers are expected to meet.
  • Check when any introductory price ends, and what the plan costs afterwards.
  • Ask whether your provider has changed its plan lineup since you signed up.

Electricity: what to check

  • Find your plan type and any benefit period on your latest bill.
  • Note the date your discount or benefit ends. Energy Made Easy says retailers must warn you before it does (Energy Made Easy — Benefit periods and contract terms).
  • Check for exit fees, then compare plans on Energy Made Easy, which lets you filter for plans with no exit fees.
  • Look at conditional discounts, such as pay-on-time, and ask yourself honestly whether you'll meet them.
  • Compare what you pay per year, not only the rate per kWh.

A simple routine

Put a reminder in your calendar for when each contract or discount ends. When it fires, set aside a short block of time to compare. If nothing better turns up, you've lost nothing and you can stop worrying until the next one.

Switching is your call. Staying can be perfectly sensible if the price is fair and the service suits you. The point is to make that choice on purpose.

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Sources

General information only, not personal advice. Sources last checked . Spotted something wrong? Tell us.

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