Australian electric-car road-user tax now a Federal Government 'priority' – report
02/09/2025 06:42 PM
A tax on electric cars is closer than ever – this time as a national measure, after Victoria’s version was struck down by the High Court – with the aim of recouping falling revenue from fewer motorists purchasing petrol and diesel.
A national tax on electric-vehicle (EV) drivers – a road user charge that could bill drivers per kilometre travelled – is said to be a “priority” of the Federal Government, which may rely on the current party being elected for a second term.
It is being pitched to fill the gap in the budget left by declining revenues from the fuel excise – the tax on the sale of petrol and diesel that is intended to fund roads – as more drivers switch to low- and zero-emissions cars.
Federal Treasurer Jim Chalmers reportedly told a Business Council of Australia dinner in Canberra last week an EV road user charge is on the agenda, attendees told The Australian Financial Review.
It is speculated the tax would not be introduced until after this year’s Federal Election, assuming the current Federal Government wins a second term.
MORE: Federal Treasurer hints at electric-car tax as fuel excise revenue expected to fall
Such a tax would need to be a national initiative, as a road user charge on electric and plug-in hybrid cars introduced by the Victorian Government was scrapped in 2023 after the High Court ruled it was a “duty of excise” that only the Federal Government can impose.
Treasurer Chalmers has previously expressed interest in an EV road user charge, but the latest report suggests it has been pushed up the agenda.
He is quoted as telling attendees of the dinner the drop in fuel excise revenue is “one of the challenges that needs addressing,” and that “we need to pay for roads somehow”.
It’s despite previous reports suggesting a significant portion of fuel excise revenue is not spent on building, upgrading and maintaining roads.
MORE: High Court rules against Victoria's electric-car road-user tax in landmark case
Parliamentary Budget Office figures cited by the AFR show Treasury predicts the fuel excise to account for 3.9 per cent of total tax revenue, down from 7.4 per cent in 1999-2000.
Close to 92,000 battery-electric vehicles were reported as sold last year – or approximately 7.4 per cent of new-car deliveries – which consume zero petrol or diesel.
In some states, electric vehicles pay reduced or no stamp duty at the time of purchase, and many models are eligible for national Fringe Benefits Tax (FBT) exemptions on novated leases – both sources of revenue for State and Federal Governments.
MORE: Electric car sales growth in Australia hits the brakes amid Tesla slump in 2024
The AFR reports the Parliamentary Budget Office has predicted revenue from the “fuel excise of effectively zero in 2050,” based a CSIRO forecast of 97 per cent of new-car sales being electric by 2050.
It said “while machinery and some large vehicles may still be powered by fossil fuels, these will still receive fuel tax credits, offsetting some of the tax.”
A spokesman for the Treasurer told the AFR late last week: “We will work with the states and territories on policies in this area following the decision in the High Court, but we'll do it in a considered and consultative way and take the time to get it right.”
The Federal Opposition has reportedly left the door open to a road user charge on EVs, while the Greens are said to oppose such a policy.
Victoria’s road user charge came into force on 1 July 2021, and charged a 2.8-cent tax on every kilometre driven by battery-electric or hydrogen-powered vehicles, or 2.3 cents per kilometre for plug-in hybrids (PHEVs)
It was criticised for taxing PHEVs twice, as drivers were required to pay fuel excise when filling up with petrol, as well as the road-user charge – irrespective of whether they were driving their vehicle on petrol or electric power.
Prior to the axing of the Victorian levy, New South Wales announced plans for a charge of 2.906 cents per kilometre driven by electric and hydrogen cars, and 80 per cent of that – 2.324 cents per kilometre – for PHEVs.
MORE: NSW Government announces electric-car road-user charges to make up for lost fuel excise revenue
Those figures are likely to be indexed higher come the policy’s proposed introduction date, which is 1 July 2027 or when EVs – defined as electric, plug-in hybrid and hydrogen cars – make up 30 per cent of all new vehicle sales, whichever occurs first.
It remains to be seen if the NSW Government would proceed with the plan, given it would open itself up to a High Court challenge like Victoria.
Australian Automobile Association CEO Michael Bradley told the AFR an EV road user charge is “a can that's been kicked down the road for too long already,” and that “political challenges of motoring tax reform only get harder the longer politicians dither and avoid”.
MORE: New Zealand electric car owners to be fined for not paying road-user charge
Meanwhile, Australian Electric Vehicle Association president Chris Jones said in a media statement last month that any national road user charge should replace the fuel excise entirely, and apply to all vehicles.
“A universal, mass × distance road user charge should eventually replace fuel excise as the user-pays component of roads and their maintenance. This should also be extended to heavy vehicles, as trucks are responsible for the bulk of road damage,” he said.
“Australia's two most popular family vehicles [Ford Ranger and Toyota HiLux utes] tip the scales at well over two tonnes, and neither of them are EVs.”
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