The NSW government will abolish stamp duty on electric vehicles and offer drivers thousands of dollars in other incentives to increase uptake as part of an ambitious $500 million plan for battery-powered cars to constitute more than half of all new car sales by 2031.

But EV drivers will be hit with a road-user tax within six years to fund road and infrastructure spending, as state governments look for ways to compensate for the loss of fuel excise revenue.

The $500 million plan to be unveiled in this week’s state budget is five times larger than the one recently announced by Victoria and will include significant spending on charging infrastructure across the state’s highways.

Environment Minister Matt Kean said: “We’re charging up the nation to make NSW the Norway of Australia when it comes to electric vehicles.“

The government will impose road-user charge of 2.5 cents a kilometre by 2027, or once electric vehicles make up 30 per cent of new car sales – whichever comes first. They currently make up less than one per cent of new car sales in NSW.

Stamp duty will be removed from EVs that cost less than $78,000 by September this year, and a $3000 rebate given to the first 25,000 vehicles sold in NSW for under $68,000. Once the distance-based tax is implemented, stamp duty will be abolished on all electric vehicles and plug-in hybrids.

NSW Transport Minister Andrew Constance and Treasurer Dominic Perrottet.
NSW Transport Minister Andrew Constance and Treasurer Dominic Perrottet.

NSW Treasurer Dominic Perrottet said the incentives and long-term tax reform were designed to make the technology more accessible.

“Our comprehensive strategy is about making sure we have the right mix in place to incentivise the take-up of electric vehicles while ensuring everyone who drives on our roads contributes to funding and maintaining them,” Mr Perrottet said.

Transport Minister Andrew Constance, who has been a vocal critic of implementing any road-user charge on electric vehicles too early, and lobbied internally for the government to offer sweeping incentives for users buy EVs, said the plan struck the right balance.

“We have to make sure we have the policies in place to give industry the green light to increase model availability and cut entry price points,” he said.

The NSW government will cut stamp duty on all electric vehicles by 2027.
The NSW government will cut stamp duty on all electric vehicles by 2027.

The government’s Electric Vehicle Strategy, released on Sunday, aims to make NSW the most affordable state in Australia to own an EV. The strategy says electric vehicles will be able to use car pool lanes and there will be priority parking spots for EVs to recharge.

The strategy has also identified the potential of future mining expansion in NSW for the minerals needed in the production of batteries.

“By acting now to identify and promote opportunities to mine and value-add by downstream processing of cobalt, nickel and rare earth elements, regional NSW can benefit from these changes in global demand,” the report says.

States across the country have been encouraging the uptake of EVs while also grappling to find a sustainable tax solution to pay for future road upgrades and infrastructure, as federal fuel excise revenue declines.

Mr Perrottet in April told the Herald he was planning on implementing an electric vehicle tax, but stressed he did not want it to impede early growth.

The NSW distance-based charge (2.5c a kilometre for EVs, and 2c for plug-in hybrids) is the same price as the Victorian model, though in the southern state the tax will start next month.

The NSW plan will provide more incentives for the early uptake of EVs and a delay on implementing the tax in order to build up scale.

Mr Kean said the timeline of the strategy was designed to ensure NSW reached its net zero emissions target.

“With new cars staying on the road 15 years on average, the vast majority of new cars sold in NSW need to be EVs by 2035 to achieve net zero emissions by 2050,” he said.

More than $30 million will also be spent on upgrading the state government’s car fleet with electric vehicles, which are likely to be on-sold within five years and spurring the second hand market.

Labor Opposition Leader Chris Minns said he hoped the package from the NSW Coalition would encourage the Commonwealth to support the electric car market in Australia.

NRMA Group chief executive Rohan Lund said the new strategy made the NSW government a “national and global leader” in the transition to electric vehicles.

Extracted in full from: NSW budget: Stamp duty on electric cars to be abolished in an effort to boost uptake (