The Australian Government has provided its first indication that a tax on electric cars could be on the cards, aimed at recouping lost revenue from fewer motorists buying petrol and diesel.

Australian Treasurer Jim Chalmers has indicated the Federal Government could introduce an ‘electric-car tax’ – designed to replace revenue lost from the fuel excise as more motorists move away from petrol and diesel vehicles – though the new levy could be years away.

As of 1 August 2023, the fuel excise – which is added to the bowser price of all petrol and diesel in Australia – is 48.8 cents per litre.

The 2022 Federal Budget projected the fuel excise – which cost 44.2 cents per litre at the time – to bring in $60.1 billion to the Australian Government’s revenue stream between the 2022-23 and 2025-26 financial years.

However, with an increasing number of battery-powered electric cars on Australia’s roads, the government will soon need to find a way to reduce the amount of tax revenue lost from the petrol and diesel fuel excise.

Speaking at the National Press Club, Dr Chalmers hinted at an unspecified tax on electric cars being implemented, though with no certainty about when or how such a charge could be introduced.

“I think in the next few years, an increasing focus, certainly of our government and most likely governments will follow us, will be this public policy challenge, this revenue challenge, this challenge to the revenue base,’’ Dr Chalmers said.

“(…) a big part of this is states’ related. There’s a court case underway right now which goes to the core of this.

“Our focus for the time being is a couple of strategies that (Minister for Transport) Catherine King and (Minister for Climate Change and Energy) Chris Bowen are working up when it comes to the broader environment and infrastructure for electric vehicles.

“No doubt at some point probably relatively soon by which I mean in the next few years, a government – our government – or our successor, will turn our mind to it.”

The court case Mr Bowen referred to is the High Court challenge against Victoria’s controversial electrified car road-user charge, which was formally backed by the Federal Government in July 2022.

In Victoria, the road-user charge – known formally as the Zero and Low Emission Vehicle road-user fee (ZLEV) – requires owners of electrified vehicles to record the number of kilometres travelled each year, and pay a tax on that distance in addition to vehicle registration costs.

From 1 July 2023, Victoria’s road-user charge was increased from 2.6 to 2.8 cents per kilometre, while the tax for plug-in hybrid vehicles – which is paid in addition to the fuel excise for any petrol used by these vehicles – went up from 2.1 to 2.3 cents per kilometre.

In the 2020-2021 financial year, the revenue generated by the fuel excise accounted for 69.9 per cent of the Federal Government’s spending on road infrastructure.

However, as reported in September 2022, an Australian Automobile Association (AAA) survey found two-thirds of motorists believed all the money raised from fuel taxes should be injected directly back into the road and transport infrastructure.

The AAA – which represents Australia’s state motoring clubs, such as the NRMA, RACV and RACQ – has previously called for the Federal Government to introduce a broader road user charge for all passenger and light commercial vehicles, not just electric cars.

According to AAA Managing Director Michael Bradley, a road user charge for all vehicles is a fairer way of distributing taxes on motorists, and is essential as the windfalls from the fuel excise are expected to be reduced.

“Electric vehicles are the way of the future. Their emergence is welcome and, with prices expected to fall in coming years, unstoppable,” Mr Bradley said in April.

“However, the shift away from the internal combustion (petrol and diesel) engine (ICE) comes with serious revenue consequences for the federal government.

“Motorists expect this money to be used to build and maintain the nation’s roads and, as things stand, it mostly is.

“But in coming years, as more people buy EVs, the fuel excise will collapse.

“Unless we want to watch our roads fall into disrepair, we must reform the way we tax transport.”

Through the first six months of 2023, sales of electric vehicles increased by 345 per cent on the same period 12 months prior – with 43,092 electric passenger, SUV and light commercial vehicles reported as sold.

However, traditional combustion engine power continue to dominate the sales charts, with 294,289 petrol vehicles and 175,939 diesel vehicles sold between January and June 2023.

Extracted in full from: Federal Treasurer hints at electric-car tax as fuel excise revenue expected to fall – Drive