A revolutionary change in the way cars are taxed could hit petrol, diesel, and hybrid buyers twice.
The Australian Electric Vehicle Association (AEVA) is calling for combustion-powered car owners to pay existing fuel excise taxes as well as looming pay-by-the-mile road user charges as a “pollution tax” to push people toward zero emission vehicles.
It says a tax approach that only applies to electric vehicles would slow the “shift to electric drive” by decreasing the cost advantage of driving an EV.
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For decades, transport infrastructure has been partly funded by a fuel excise applied to every litre of fuel purchased by road users.
Currently positioned at 53.7 cents per litre, the tax effectively means people pay to use roads based on how far they drive and how large their vehicle is.
The excise does not apply to electric cars, which can be charged privately, or through public infrastructure.
The current tax system was established before EVs were sold in significant numbers.
But EV sales now outnumber petrol or diesel cars, and Tesla’s Model Model Y is Australia’s most popular new car, so Australian authorities are working to replace lost revenue from the fuel excise tax with a new road user charge that drivers must pay for every kilometre travelled.
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The AEVA says more than 85 per cent of its members are behind a pitch for road user charges to be applied to petrol, diesel, and hybrid drivers as well as electric vehicle owners. Association policy convener Chris Jones says combustion-powered cars should continue to pay fuel excise taxes as an incentive to make a green switch.
“If two vehicles weigh the same, and are driven the same distance each year, it’s only fair that they pay the same road user charge,” Dr Jones says.
“But if one of those vehicles burns petrol or diesel, they should pay for the cost of that pollution too.
“We knew this was coming, so we’ve spent the last decade both leading the debate and advocating for a fair implementation.
“We’re not after a free ride, but we are asking for policy which encourages EV adoption and motivates better vehicle choices.”
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The association is pushing for road user charges to be federally overseen, universally applied, and to factor in vehicle weight.
Without the latter, an electric motorcycle that weighs 200kg could attract the same fees as an enormous electric SUV that weighs more than three tonnes, despite applying minimal wear and tear to the road.
A policy statement surrounding the issue, published by the AEVA, proposes that combustion-powered vehicles should face extra taxes to offset “additional costs to society in the form of air pollution and greenhouse gas emissions”.
“The negative social costs associated with driving a diesel or petrol vehicle should attract a price additional to the [road user charge],” it says.
“Fuel excise is a highly efficient, and valuable source of federal revenue and is effectively a tax on pollution. It should be retained in some form for this reason.”
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Victoria became the first state to introduce an Australian road user charge for electric vehicles in 2021.
It required EV and plug-in hybrid owners to take photos of their dashboard to record their annual mileage and pay fees for road usage – 2.8 cents per kilometre for electric vehicles, and 2.3 cents per kilometre for plug-in hybrids.
EV owners took the Victorian Government to the High Court, which ruled that the state did not have the authority to impose such a tax on drivers, prompting Victoria to end the scheme and issue refunds in 2023.
But that has not stopped NSW from preparing to introduce similar charges.
The NSW Government plans to introduce a road user charge for electric vehicles from July 1 2027, currently priced at 3.095 cents per kilometre for a battery electric vehicle, or 2.476 cents per kilometre for a plug-in hybrid.