Rarely do Australians collectively put up their hands to volunteer for a new tax.
But it appears to be happening in the automotive industry, with disparate groups calling for a road-user charge for electric vehicles to support the nation’s future transport needs.
It is a proposal likely to be debated this week at the federal government’s productivity roundtable, after Treasurer Jim Chalmers signalled his support for changes.
But while infrastructure and transport groups agree on a road-user charge as a concept, they disagree on when it should be introduced, who should pay and whether petrol and diesel vehicle drivers should be charged more.
While some argue the fee should apply only to electric vehicles not subject to fuel excise, others say a road-user charge would be more effective if applied to every vehicle.
The debate over transport taxes follows record EV sales. Australians bought more than 29,000 of them in the three months to June, according to the Australian Automobile Association. That represents 9 per cent of all car sales.
It also comes amid falling fuel excise collection. The tax raised $15.71 billion in the 2024 financial year but could fall to zero by 2050 as electric vehicles replace fuel-powered cars, the Parliamentary Budget Office warns.
Infrastructure Partnerships Australia chief executive Adrian Dwyer said urgent changes were needed to restore Australia’s dwindling tax revenue for roads. Groups at a roundtable on the issue last Monday widely agreed the current system for charging motorists was “unfair, unsustainable and inefficient”, he said.
“A distance-based charge on light EVs is the logical starting point,” Dwyer said.
“Heavy EVs can be included. But starting there alone won’t address the issues structural to this debate, namely the core issue of fairness as more light EVs join the fleet.”
But Polestar Australia managing director Scott Maynard said making electric vehicle drivers pay for all lost tax revenue would also be unjust. Fuel excise collection had fallen for years for many reasons, he says, including more efficient internal combustion engines.
“Petrol cars … have come down and down in their usage of fuel; their economy has improved and it would be unfair to try to recoup all of the targeted fuel excise revenue strictly from electric vehicle drivers,” Maynard said.
“To simply, in a really ham-fisted way, nail an addition cost to electric vehicles only at a transitional point where we’re trying to get people to consider them as a true alternative to traditionally powered vehicles that pollute our air, is not the way to do it.”
Adding an ongoing charge to electric cars at early stage in their adoption could make potential buyers reconsider or delay purchases, Maynard said.
His concern is shared by the Electric Vehicle Council, legal and policy head Aman Gaur said. It supports introducing a road-user charge but at a suitable time and if applied to all vehicles.
“We support fair funding of our roads but I think there’s been really important considerations that have been left out of what I would call a pretty shallow debate about fuel excise at the moment,” Gaur said.
“We would only support a road-user charge if it’s universal; universal and focused on emissions intensity.”
Gaur said any road-user charge should apply to all light vehicles, and should be introduced to electric cars only when their adoption hits 30 per cent.
Several state governments have floated plans to introduce road-user charges for electric and plug-in hybrid electric vehicles from 2027, including NSW, Tasmania, South Australia and Western Australia.
However the legality of state-based charges is in question after the High Court found in October 2023 that Victoria’s Zero and Low Emission Vehicles charge was unconstitutional.
The states’ timeline for introducing a charge could be appropriate, Australian Electric Vehicle Association national president Chris Jones conceded, as the nation’s electric fleet was likely to reach 30 per cent of new car sales by that date.
He said a road-user charge should be based on a vehicle’s mass and how many kilometres it travelled each year, and should apply to all vehicles regardless of fuel source.
“The average person drives 12,000 kilometres a year, so it would work out to cost about $380 to $400 a year.”
But Jones said the government should also maintain existing fuel excise charges, as they would act as an incentive for motorists to purchase low-emission vehicles.
“It’s directly proportionate to how much pollution you cause,” he said.
“It’s an effective pollution tax and we want to discourage people from buying vehicles that run on petrol.”
While a road-user charge is likely to be part of the discussions at the economic reform roundtable from Tuesday, Chalmers said the Albanese government will “take the time to get this right”.
In the meantime, Gaur said he hoped the road tax reform debate can be tackled sensibly – and the idea that EV drivers don’t pay to use roads could be discredited as fees include registration, stamp duty, luxury car and fringe benefits taxes, and taxes on electricity.
“EV drivers do pay tax,” he said.
“That is a really pernicious and completely untrue part of this conversation.”
-AAP
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