The docket is signed and the truck pulls out of the yard. For most workshop managers that is the end of the story. It is actually the start of a process that turns dirty oil back into base oil, fuel and other products. A federal scheme has been paying for it since 2001. Here is where your used oil goes.
First stop, a licensed processor
Oilwise delivers collected oil to licensed processors for recycling and recovery. The first job at the facility is to get the water out. Used oil picks up water from condensation, wash downs and the occasional coolant leak. The processor removes it in settling tanks where the oil and water separate. The Australian Government’s used oil fact sheet calls this dewatering.
Cleaning and re-refining
From there the path depends on the end product. The fact sheet lists the stages a processor can put used oil through: filtering to remove solids, demineralisation to remove inorganic material and certain additives, propane de-asphalting to remove the heavier bituminous fractions, distillation to separate the oil by boiling range, solvent extraction to remove undesirable compounds and hydrofinishing to improve the physical properties of a re-refined base oil.
Not every batch goes through every step. Oil destined for industrial burner fuel needs filtering and dewatering. Oil that is going back into an engine goes the whole way. Turning used motor oil back into lubricating oil is called lube to lube recycling. The re-refined base oil is blended with additives and tested so it can be used in the same way as a virgin oil product.
What it becomes
Recycled oil ends up in more places than most people expect. The fact sheet lists industrial burner oil, mould oil for releasing pressed metal and concrete products, bitumen based products, additives in manufactured products and re-refined base oil for use as a lubricant, hydraulic or transformer oil. The NSW EPA puts it more simply for the oil dropped at its community recycling centres: it is processed to become a lubricant or used for waste to energy.
The key fact is that oil does not wear out. It gets dirty. Cleaned and re-refined, it can be used again and again.
Why it is worth the trouble
Used motor oil is hazardous. In service it picks up lead, cadmium, chromium, arsenic, dioxins, benzene and polycyclic aromatics. Released into the environment those contaminants harm people, plants, animals, fish and shellfish. In water, oil floats as a scum that blocks sunlight and oxygen. Burned at low temperatures it produces airborne pollutants. One litre of oil can contaminate one million litres of water. Recycling keeps all of that out of the ground, the creeks and the air.
The scheme that pays for it
The Product Stewardship for Oil Scheme was introduced by the Australian Government in 2001 under the Product Stewardship (Oil) Act 2000. It is a levy and benefit system. A levy is charged on oil based lubricants when they enter the market. On 1 July 2023 that levy rose from 8.5 cents to 14.2 cents per litre of oil or per kilogram of grease. The money funds benefits paid through the Australian Taxation Office to recyclers for each litre of recycled product they produce. The more thoroughly the oil is processed, the higher the rate.
| Category | Benefit (cents per litre) |
|---|---|
| 1. Re-refined base oil for use as a lubricant or a hydraulic or transformer oil, meeting the specified criteria | 50 |
| 2. Other re-refined base oils, such as chain bar oil and oils incorporated into manufactured products | 10 |
| 3. Diesel fuels that comply with the automotive diesel fuel standard | 7 |
| 4. Diesel extenders, filtered, dewatered and demineralised | 5 |
| 5. High grade industrial burning oils, filtered, dewatered and demineralised | 5 |
| 6. Low grade industrial burning oils, filtered and dewatered | 3 |
| 7. Industrial process oils and lubricants, reprocessed or filtered but not re-refined | 0 |
| 8. Gazetted oil consumed in Australia for a gazetted use | 14.2 |
The department notes that benefits are currently being claimed for categories 1, 2, 5 and 8 only, because industry practice and other legislation have changed since the scheme began. The higher rate for category 1 reflects the value of fully re-refining used oil.
What the numbers say
The department reports that the amount of oil Australia collects and recycles has risen from none when the scheme began to more than 320 megalitres of base lubricating oil every year. It describes that as more than half the oil sold in Australia each year. The fifth independent review of the Act, completed by the University of Technology Sydney, was tabled in Parliament on 30 October 2025.
What it means at your workshop
Two things. First, the cleaner the oil in your tank, the more of it can be re-refined rather than burned. The fact sheet is blunt: no other substances should ever be allowed to mix with used oil, because contamination by water or other chemicals may mean it cannot be recycled. Second, your docket records the destination of every load, so when someone asks where the oil went, you can show them.
To book a collection anywhere across greater Sydney and beyond, call 0408 679 169 or request a collection.
Sources
- Australian Government Department of Climate Change, Energy, the Environment and Water, Product Stewardship for Oil (PSO) Scheme (page updated 30 October 2025).
- Australian Taxation Office, Product Stewardship for Oil program rates, benefit rates as at 1 July 2023.
- Australian Government, Used motor oil: a valuable resource and Why we should recycle used motor oil (fact sheets).
- Australian Government Department of Climate Change, Energy, the Environment and Water, Used oil recycling.
- NSW EPA, Community Recycling Centres, what happens to the waste.
- Oilwise, Compliance.