Electric car owners could lose a “free kick” tax loophole and pay extra to register their car each year.
Drivers of petrol and diesel vehicles pay the government a special fuel excise of 51.6 cents per litre – a tax currently avoided by EV owners.
Treasurer Jim Chalmers is closely examining an EV tax ahead of the May budget, according to a report in The Australian.
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Pitcher Partners motoring analyst Steven Bragg said the road-user charge for EVs had been a subject of debate for years.
“This was always in the works. It was a free kick that EV users got, not having to pay the fuel excise tax, Bragg said.
“It’s just catching up to what was always sort of something that should have been addressed early on, but the government, from a message point, does not want to hinder EV uptake in any way.”
According to Jim Chalmers, the current fuel excise would not be sustainable “over the next decade or two.”
“As more and more people get off petrol cars and into EVs, we’ve got to make sure that the tax arrangements support investment in roads,” Mr Chalmers told reporters.
“But we’re in no rush, changes of this nature will be made, because the status quo won’t work in 10 or 20 years.”
Victoria introduced its own road user charge for electric and plug-in hybrid vehicles in 2021, but the state government was forced to scrap its electric vehicle levy following a High Court ruling in 2023.
How would the road-user charge work?
At this stage, the most likely model would see drivers charged based on how many kilometres they travel each year.
There are two ways the governments can track road use.
One option is GPS-based tracking in electric vehicles, though that would almost certainly raise privacy concerns.
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The second option is to track distance based on annual odometer readings.
That system already exists in some form for many light vehicles in NSW and would be easier for governments to roll out nationally.
However, a key issue would be fairness across the tax system.
“I would hope they would treat both petrol and EVs the same,” Mr Bragg said.
“So everyone goes to a distant space and makes it fair with EVs as the 1st cab off the rank.”
How much would EV owners pay?
Exactly how much EV drivers would pay under a national road-user charge remains unclear.
“You would give your starting and ending odometer reading when you register the vehicle, and based on the kilometres driven, it would be part of your registration,” Mr Bragg said.
“So the cost of rego will go up and impact people based on their budget, especially if it’s annually.”
That means the further you drive, the more you are likely to pay.
According to a similar NSW road user scheme, the average owner could pay an additional $300 to $400 each year.
Is it still worth buying an EV in response to the fuel crisis?
For many Australians, the answer may still be “yes”.
Even with a road user charge, EVs are likely to appeal to drivers looking to cut running costs while petrol prices remain volatile.
What could it mean for second-hand cars?
The used market could shift depending on fuel prices.
If the US-Iran war drags on and petrol remains expensive, used EVs could become more attractive as a way for households to escape rising bills.
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This new road-user charge comes after Prime Minister Anthony Albanese announced a new free trade agreement between Australia and the European Union.
The deal will see the current 5 per cent tariff on goods imported from Europe axed.
It will also introduce a new luxury car tax threshold that raises from $91,387 to $120,000, saving motorists up to $9442.
Australian Automotive Dealer Association chief executive James Voortman said the government missed the chance for broader reform.
“While the introduction of a higher LCT threshold for electric vehicles provides some benefit, it is a narrow change that will only affect less than 1 per cent of vehicles sold and does not address the fundamental flaws of the tax”, he said.
