The Australian government is considering a new road user charge for electric vehicles (EVs), a policy shift that could impact hundreds of thousands of drivers across the country. The proposed reform aims to replace lost fuel excise revenue, ensuring continued funding for road maintenance and infrastructure as more Australians switch to EVs.
The announcement has sparked debate, with proponents arguing that all road users should contribute equally while critics warn that extra charges could discourage EV adoption, slowing Australia’s progress toward net-zero emissions goals.
Why Is the Government Introducing a Road User Charge?
Australia’s roads have historically been funded by the fuel excise tax, currently set at 50.8 cents per litre. However, as more Australians transition to electric and fuel-efficient vehicles, the government’s fuel tax revenue is declining.
- Fuel excise tax revenue is projected to drop by $470 million over the next four years.
- EV owners currently avoid this tax, meaning they contribute less to road maintenance costs.
- Treasurer Jim Chalmers has identified road user charges as a priority tax reform area to ensure future funding.
For official government tax policy details, visit: Australian Treasury
How Would the Proposed Road User Charge Work?
Although specific details have not been finalized, the proposed tax would likely be distance-based, meaning EV drivers would pay a fee based on how many kilometres they travel.
- The Parliamentary Budget Office (PBO) has suggested a rate of 4.8 cents per kilometre for EVs, which matches the average tax paid by petrol and diesel vehicle owners.
- EV drivers would report their odometer readings annually or use GPS-based tracking systems to calculate their road usage.
- Hybrid and plug-in hybrid vehicles may be taxed at a lower rate based on their fuel efficiency.
State-Level Attempts and Legal Challenges
Several Australian states have already attempted to introduce EV road user charges:
- Victoria introduced a 2.5 cent/km charge in 2021, but the High Court ruled it unconstitutional in 2023, stating that only the federal government has the power to levy such charges.
- New South Wales (NSW) and South Australia planned similar charges, but these were postponed following the Victoria ruling.
Following these legal challenges, the federal government is now taking the lead on creating a national road user charge system.
How Will This Affect EV Drivers?
If the federal government proceeds with the road user charge, EV drivers could be required to pay an annual tax based on their mileage.
- EV owners who drive 15,000km per year could pay around $720 annually at a 4.8 cent/km rate.
- This tax could add to the overall cost of owning an EV, impacting potential buyers.
- The government may offer exemptions or rebates for early adopters to ease the transition.
Industry and Public Reaction
The proposal has sparked strong reactions from the automotive industry, environmental groups, and consumer advocates.
- The Royal Automobile Association (RAA) supports a fair system where all vehicles contribute, but warns against making EVs less attractive to buyers.
- Mitsubishi Motors Australia has backed a national road user charge as long as it replaces fuel excise rather than adding extra costs.
- Environmental groups, including the Electric Vehicle Council, argue that new taxes on EVs could slow the shift away from fossil fuels.
Will This Impact Fuel-Powered Car Owners?
For now, petrol and diesel drivers will continue to pay the fuel excise tax. However, some experts suggest that a national road user charge could eventually replace fuel excise taxes altogether, meaning all road users would pay based on their mileage.
- The shift towards distance-based charges for all vehicles could happen in the next 10 to 15 years.
- Some states are considering reducing fuel excise taxes if a road user charge is implemented.
What Happens Next?
The federal government is conducting consultations with state governments, industry leaders, and consumer groups.
- A formal proposal is expected later in 2025, outlining specific charge rates and exemptions.
- If approved, the road user charge could take effect in 2026, though phased implementation may apply.
Follow Australian Government policy updates here: Australian Government – Infrastructure & Transport
Final Thoughts
The proposed EV road user charge represents a major shift in Australia’s transport taxation system.
- The plan aims to ensure fair contributions from all road users as fuel excise revenues decline.
- Critics warn that the charge could slow EV adoption, making them less attractive to potential buyers.
- A national road user charge could replace fuel excise taxes altogether, impacting all Australian drivers in the long term.
As the government prepares to introduce formal legislation, EV owners and the wider public will have opportunities to voice their opinions through public consultations and advocacy groups.
With EV sales on the rise, how Australia balances revenue needs with sustainability goals will shape the country’s transport future for decades to come.
This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.
A senior at Yale-NUS College with interests in developmental and labour economics, as well as creative non-fiction and poetry. Currently, I’m studying as an Economics major and an Arts and Humanities minor (focusing on Creative Writing) with heavy involvement in the Singaporean journalism scene and involved in research on economic history and educational policy. I’m working as an author for The Octant, Yale-NUS’ student publication, as a writer for Wingspan, Yale-NUS’ alumni magazine, and as a tutor for the NUS Libraries Writer’s Centre. | Linkedin