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Plans to tax electric cars for every kilometre driven may not be as high a priority as first thought, but the Federal Government has warned a road-user charge will come eventually.
Electric Cars
Australian electric-car drivers will eventually face a road-user tax – charging them for every kilometre they drive – but it remains some time away, according to the Federal Government.
It will be needed to fill the gap in the budget left by declining revenue from the fuel excise, as the petrol and diesel engines in new cars consume less fuel than before at the same time as Australians adopt hybrid and electric cars in greater numbers.
Recent comments attributed to Treasurer Jim Chalmers have suggested Canberra sees a national road-user charge on electric cars as a “priority”, likely should the current Federal Government win this year's election.
Chris Bowen, Federal Minister for Climate Change and Energy, has walked back the urgency of the Treasurer's comments, but acknowledged a road-user charge will one day be required.
"The Prime Minister, the Treasurer and I have been clear, the time will one day come where that has to be done, but it's not yet," Minister Bowen told a panel at the recent Everything Electric expo in Sydney.
"Fuel tax will evaporate. At this point, it's a myth that fuel tax is falling because of EVs – actually fuel tax is falling because petrol cars are much more efficient than they were 20 years ago, and that will just get faster as with our New Vehicle Efficiency Standards.
"That income for governments will need to be replaced, but we are not contemplating it imminently because we're in the middle of this transition.
"I think we all know, we can't pretend it's one day not going to happen, but it's not going to happen immediately."
Data sourced from the Parliamentary Budget Office cited by the Australian Financial Review shows the fuel excise is forecast to account for 3.9 per cent of total tax revenue in the 2024-25 financial year, down from 7.4 per cent in 1999-2000.
The top-selling car in 2000 was the Holden Commodore, which in V6 automatic sedan trim claimed fuel use of 8.5L/100km – compared to the most popular cars today, the Ford Ranger diesel (7.6L/100km) and Toyota RAV4 Hybrid (4.7L/100km).
But electric cars have grown in popularity in recent years, last year accounting for close to 10 per cent of new-vehicle sales – while consuming no liquid fuel at all.
Victoria introduced a road-user charge for electric and plug-in hybrid vehicles in 2021, charging 2.8 cents per kilometre driven by battery-electric or hydrogen-powered vehicles, and 2.3 cents per kilometre for plug-in hybrids (PHEVs).
Prior to that, it was criticised for taxing PHEVs twice, as drivers were forced to pay fuel excise when filling up with petrol, in addition to the road-user charge, irrespective of whether they were driving their car on petrol or electricity.
Minister Bowen's comments come as the Federal Government is found to have grossly underestimated the cost to the taxpayer of its Fringe Benefits Tax (FBT) exemption on plug-in hybrid and electric cars priced under the Luxury Car Tax (LCT) threshold.
As reported by the Australian Financial Review, the annual cost of the FBT exemption has been estimated at $564 million – according to Institute of Public Accountants senior tax adviser Tony Greco – compared to a forecast of $55 million in 2022.
Forecasts from the Federal Government on the predicted revenue loss are less extreme, at $760 million over three years – rather than $564 million in one year.
Electric Cars Guide
Alex Misoyannis has been writing about cars since 2017, when he started his own website, Redline. He contributed for Drive in 2018, before joining CarAdvice in 2019, becoming a regular contributing journalist within the news team in 2020. Cars have played a central role throughout Alex’s life, from flicking through car magazines at a young age, to growing up around performance vehicles in a car-loving family. Highly Commended - Young Writer of the Year 2024 (Under 30) Rising Star Journalist, 2024 Winner Scoop of The Year - 2024 Winner
