Motoring and automotive groups are pushing the federal government to combat a potential patchwork of state-based levies on electric cars by introducing a nationally consistent tax to help replace rapidly falling revenue from fuel excise.

The uptake of low-emission vehicles such as plug-in hybrids and battery electric cars, as well as a push towards office workers staying at home, threatens to eat into a reliable and consistent source of revenue used by governments for new road projects and regular upgrades.

Electric vehicles could face a national tax.
Electric vehicles could face a national tax.

Three state governments – Victoria, South Australia and NSW – have flagged their own potential new taxes on electric cars based on distance travelled, but advocates for the new technology have warned the taxes could harm take-up.

The Australian Automotive Association is among a handful of groups calling for “urgent national leadership and co-ordination” ahead of the May budget to deliver a nationally consistent road user charge.

In its submission to this year’s budget, the peak organisation for Australia’s motoring clubs, including the RACV and NRMA, argued that irrespective of technological shifts, the fuel excise was “an inequitable tax”.

It said a distance-based road user charge would avoid creating inconsistent tax systems that disincentivised the renewal of Australia’s passenger fleet while maximising the benefits of technological advances in motoring.

“The federal government has a leadership role in the reform of motoring taxation and the effective and sustainable transition to new vehicle technologies,” it says.

The federal government collects 42.3¢ in tax on every litre of petrol and diesel sold at the pump in Australia and paid by operators of road vehicles when driving on public roads. The 2020-21 federal budget forecast that $49.36 billion in net fuel excise would be collected over the next four years.Advertisement

But despite a growth in population, the vehicle fleet and total vehicle kilometres driven, revenue from fuel excise continues to decline in real terms as newer, safer vehicles with reduced fuel consumption hit the roads.

Global Electric Transport chief executive Harry Hamann said regardless of which level of government decided to introduce an EV tax based on distance travelled, such a method would be inefficient, inequitable, unfair, and too costly to administer and collect.

“There is also the matter of the likely method of recording distance – a logbook – being open to misuse, abuse and inaccuracy,” he wrote in his budget submission.

He argues instead that a levy on EV owners should be incorporated into the cost of charging their vehicles.

“The technology to instead introduce a charge-based EV tax system exists, it is not new. Nor is it expensive,” he said. “It can be retro-fitted to all current charging stations, but obviously the longer it takes to make it happen, the more expensive the cost of retrofitting will be.”

Last year’s budget shows that the proportion of net fuel excise returned to land transport infrastructure will increase from 82 per cent in 2020-21 to a peak of more than 100 per cent in 2022-23 before settling at 98 per cent in 2023-24.

Federal Treasurer Josh Frydenberg told a business breakfast in Melbourne on Friday people were “voting with their feet” with a doubling of the number of electric cars in Australia over the past few years.

The federal government has promised to invest in a charging network for electric vehicles.
The federal government has promised to invest in a charging network for electric vehicles.CREDIT:

“Some of the states are toying with other issues because the more electric cars that are coming on the road, the less fuel excise you’re getting,” Mr Frydenberg said.

“Fuel excise is a big revenue earner for the government. It’s how we fund infrastructure. So the rise of electric cars… will impact both our tax base and we’ve got to think about that.”

He said the federal government’s priorities remained investment in infrastructure and charging stations to ensure commuters could drive from Melbourne to Brisbane with an electric car.

About $5.9 billion is expected to be collected from the petrol excise this year after falling to $5.6 billion last year as Australians worked from home during the coronavirus pandemic, taking millions of cars off city roads for months. Two years ago it was expected almost $7 billion in revenue would be brought in this financial year.

Revenue is expected to further decline with the projected growth in electric and alternatively fuelled vehicles. Federal government projections estimate that electric vehicles will make up 26 per cent of
new car sales by 2030.

Electric Vehicle Council chief executive Behyad Jafari has hit out at the Victorian government’s recent move to levy 2.5 cents per kilometre driven by electric and other low emissions vehicles and 2 cents for plug-in hybrid electric models.

“Victoria is now doing what no other jurisdiction on earth does by discouraging people from buying electric vehicles by slugging them with a special tax,” Mr Jafari said last week.

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