The Turnbull government is ­preparing a radical reform to ­replace $10 billion in annual fuel excise with smarter ways to charge motorists, hoping to use the ­revenue to build new roads where they are needed most.

The government will clear the way for charging motorists by the distance they travel and even the time of day they use a congested road, using GPS devices and other electronics that are increasingly standard in modern vehicles.

Malcolm Turnbull will take the first steps to reform in an infrastructure statement today that will outline plans for new motorways in each state, acting on expert advice to find a better way to put taxpayer funds to work.

The Prime Minister and Major ­Projects Minister Paul Fletcher will reject a call for an immediate move to road charging for all light vehicles but will prepare the ground for the sweeping change by launching a review into the best options to raise revenue.

The government will also announce a shake-up for the truck and bus industries by creating an independent agency to set heavy vehicle charges, responding to industry complaints over fees that cost more than $3bn a year.

Mr Fletcher warned in August that the excise on petrol and diesel was no longer the best way to pay for roads, with hybrid vehicles and electric cars leading to huge variations in the price families will pay to use a road. Advocates for reform argue that fuel excise is already a form of distance charging — given taxpayers pay more for every kilometre they drive — but it punishes families that cannot ­afford to ­upgrade from older vehicles that consume more fuel.

The announcement today will include a response to an Infrastructure Australia report from February that listed the priorities for major projects and also called for the new approach to funding.

Infrastructure Australia, an independent agency that advises the government, said the flaws in the existing regime included lack of fairness, inefficiency and problems with sustainability.

The government is acting on the agency’s recommendation to set up a high-level inquiry to look at the “social implications” of ­replacing the current taxation with a direct charge on motorists.

The Productivity Commission has strongly backed a more ­efficient approach by pointing to the development of GPS devices that can track a car’s movement and apply a charge depending on where it travels, the time of day it uses a major road.

One idea is to apply a different charge according to the weight of the car and therefore the wear and tear it causes on a road.

“Everyone knows the current system is broken, everyone knows that change is needed,” one ­observer told The Australian on condition he not be named.

The government will have to tough out the political challenge of replacing one form of taxation with another, leading it to take a gradual approach to the review and any subsequent reform.

Australian Automobile Association chief Michael Bradley said the current system was unsustainable and inequitable but any effort to improve it needed a clear understanding of the failings.

“The AAA has long called for an apolitical study of the strengths and weaknesses of possible future motoring tax models and congratulates the government on what is an important first step,” Mr Bradley said.

Extracted from The Australian