In a recent statement, the transport minister expressed reservations about the introduction of a road user charge, which would impose a new tax on electric vehicles (EVs). Catherine King emphasized that the government is keen to encourage the adoption of EVs and does not wish to create any barriers to their uptake, despite the treasurer suggesting that the time has come for such a charge.
The transport department is currently exploring a model for implementing this tax, but King indicated that she does not foresee a clear path for its passage through parliament. The potential tax on road users, which would include EVs, has now been put into question by the transport minister, who suggested that the timing may not be right for its introduction.
Last year, Treasurer Jim Chalmers stated that a tax on road users should eventually replace the existing fuel excise tax on petrol and diesel. However, since that announcement, the government has remained relatively silent on the proposed charge, amid concerns within the cabinet that taxing EVs could undermine efforts to promote cleaner vehicles.
Various administrations have contemplated alternatives to the fuel excise as EVs become more prevalent in Australia. Without any adjustments, the federal government may face a significant budget shortfall, as the fuel excise currently generates approximately $15 to $18 billion annually, which is crucial for funding road improvements and other transportation infrastructure.
During an appearance on ABC Insiders, Minister King reiterated the importance of promoting EV adoption: “We are trying to encourage as much electric vehicle uptake as possible, and we don’t want to disincentivize that at all. There’s a balance that needs to be achieved,” she stated. King added that with the current surge in EV sales, it may not be the opportune moment to implement such a tax. She also noted the legislative hurdles that any proposed charge would face in parliament.
Despite the federal government’s hesitance, there is a divide regarding the potential charge’s impact on EV adoption. The Electric Vehicle Council has expressed support for a “fair” road user charge, arguing it should not hinder the transition toward clean transportation. They suggest that the tax should only be applied to EVs once a third of new car sales are fully electric.
Meanwhile, some states are signaling their intent to pursue their own road user charges if the federal government does not take action. New South Wales has already passed legislation for a road user charge set to take effect next July, while Western Australia has proposed a similar initiative. In contrast, Victoria’s attempt to introduce a road user charge on EVs was deemed unlawful by the High Court, which classified the levy as a goods tax beyond the state’s authority.
The uptake of EVs has significantly increased since March, fueled by growing concerns regarding fuel security, leading more consumers to opt for vehicles that do not rely on petrol or diesel. In fact, battery electric vehicles accounted for nearly 15 percent of new car sales last month, nearly doubling from the previous month.
Industry representatives have cautioned against the removal of an “EV discount,” which exempts these vehicles from paying fringe benefits tax when acquired through novated leases, as it is essential for making the initial purchase more affordable for consumers. This tax exemption is currently under review because its financial impact has exceeded the government’s initial projections.
Minister King indicated that any announcements regarding the EV discount would be made in conjunction with the upcoming budget next month, stating, “In my opinion, it has effectively contributed to the electrification of passenger vehicles. I believe they are competitive, and currently, they are indeed competitive.”
