Petrol Drivers Pay More Road Tax Than EV Owners as Flat-Fee Proposal Emerges

Fuel excise is meant to make drivers pay for the roads they use, but a new e61 Institute paper argues it is losing that role. It estimates that a petrol Mazda 3 driver pays about $340 a year more in excise than someone driving a Tesla Model Y. With excise at 53.7 cents a litre and electrified cars taking a growing share of sales, the question of who pays for roads is getting harder to avoid.

What the e61 paper found

The paper, “Paying for the road you use”, was written by e61 economists Amy Tramontozzi and Lachlan Vass and published on 2 October 2026. It is independent think-tank research. It is not government policy, and no government has adopted its recommendations.

Its starting point is the rate. Excise on petrol and diesel has been 53.7 cents a litre since 3 August 2026, according to the ATO. That rate followed temporary cuts earlier in the year and the regular August indexation.

The authors then compare three popular cars. On their figures, a Tesla Model Y pays nothing in fuel excise per kilometre. A Toyota RAV4 hybrid pays about 2.09 cents a kilometre, and a petrol Mazda 3 about 2.85 cents. For a typical driver, e61 says, that adds up to the Mazda 3 owner paying roughly $340 a year more than the Tesla owner. Both cars use the same roads.

Why the excise base is shrinking

Electric and hybrid vehicles made up about half of new car sales earlier in 2026, according to industry data cited by e61. Every one of those cars pays less excise, or none, per kilometre than an equivalent petrol car.

Fuel excise currently raises just under 1% of GDP. Citing Treasury, the authors say that could fall to effectively 0% by 2050. On their own estimates, excise revenue from passenger cars could reach effectively zero as early as 2045 if electric vehicle take-up continues.

That matters for the federal budget. Excise is a Commonwealth tax, and road spending competes with every other call on revenue. A shrinking base means either another source of revenue or a bigger gap for the budget to cover.

The e61 plan: a flat fee for cars, not a per-kilometre tax

The headline recommendation may surprise some readers. For passenger cars, e61 does not favour a per-kilometre road user charge. It proposes a flat annual access charge instead, arguing this avoids distorting decisions about how much people drive.

In e61’s framing, each tool should target a specific cost. Excise can price pollution, variable tolls can price congestion, and a flat fee can recover a fair share of what it costs to provide the road network. A single per-kilometre charge on every car would try to do all three jobs at once, and would do none of them precisely.

Its first recommendation is that governments be clear about which costs a charge is meant to cover. The paper’s other recommendations are: