Federal Treasurer Jim Chalmers met with his state/territory counterparts on Friday to discuss (among other things) a potential road user charge (RUC) for electric vehicles.
What Was The Outcome Of The Meeting?
An options paper was put together for the meeting, a goal of which was for state and territory treasurers to “agree or to discuss some principles behind this policy design”.
What was in that paper isn’t clear. But the treasurers were in general agreement about the need for reforms to road user charging arrangements for electric vehicles, and that those reforms should be designed not to impede EV uptake.
“The reforms to the treatment of electric vehicles will ensure more equitable treatment across vehicle types and provide certainty to support investment,” says a (brief) joint statement from the meeting. “The design of reforms should be as simple as possible and minimise administration and compliance burden. We will ensure any changes are phased to enable the productivity, climate and consumer benefits of increasing electric vehicle uptake over the coming years.”
In a separate summary of the meeting, which also identified the need for reduction or removal of regulations that disadvantage electric heavy vehicles, Treasurer Chalmers said:
“The Commonwealth will progress work with the states and territories and take the time to get the policy development right.”
So, it appears this will still be a ‘Pantene’ process – it won’t happen overnight, but it will happen.
Why Is An EV Road User Charge Being Pursued?
EV owners avoid paying fuel excise and plug-in hybrid owners only pay it when they top-up at the pump. Fuel excise helps pay for road projects and maintenance — sort of. Collected by the federal government, fuel excise goes into general/consolidated revenue; where it can be spent on just about anything.
“Universal” RUC Missing In Action
The seismic shift that will be brought about by electric vehicles also means a seismic shift is needed in how we fund roads. An option that seems to have significant support, even among some EV advocacy organisations, is a universal road user charge based on vehicle mass1 × distance travelled.
For example, the Australian Electric Vehicle Association (AEVA) is supportive of a road user charge.
“… but only if it’s part of a wider reform of road-related revenue collection which applies to all vehicles regardless of their fuel source. This is particularly relevant as conventional hybrids are primarily responsible for the decline in fuel excise collected form [sic] petrol sales, yet such vehicles would not be captured under an EV-specific RUC.”
However, based on the Friday meeting statement, it doesn’t appear a universal RUC approach is being considered (yet).
What About The Fuel Excise’s Future?
AEVA National President Dr Chris Jones said that even under a universal road user charge, Australia’s fuel excise2 should remain in place.
“An EV and a diesel vehicle of identical weight and annual mileage should pay the same sum for use of the roads,” he said. “But the diesel vehicle should pay something extra for the noise, harmful pollution, and greenhouse gas emissions. Fortunately, fuel excise captures that perfectly already.”
And the AEVA says while the RUC should be set by the federal government, state and territory transport departments should administer the scheme and retain all revenue for road maintenance.
The Federal Treasurer reportedly isn’t keen on a universal road user charge *and* fuel excise existing side-by-side as he considers this a double-tap tax for internal combustion engine (ICE) vehicle owners. But that’s the point: a “polluter pays” approach would make ICE ownership less desirable; although there are significant social and other implications to consider.
Footnotes
- The weight of a vehicle being included in the proposed universal RUC formula is important. But vehicle weight damage to roads is exponential. The ‘fourth power rule’ states damage is proportional to the axle load raised to the power of four. So, trucks do the most damage. But as things stand, trucks with a gross vehicle mass greater than 4.5 tonnes are eligible for fuel tax credits if used for an on-road business activity. ↩
- The current fuel excise rate is 51.6 cents for every litre of fuel purchased. ↩
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All these charges are nonsensical. Even a RUC, in a huge country so reliant upon roads, is ridiculous, with weight x distance creating punitive differential taxation for both regional and remote Australians, and freight. Yes trucks do the overwhelming damage to roads, but then it’s freight used by all Australians, on those trucks.
Nearly half the total raised annually by the existing fuel excise could be recovered simply by scrapping the diesel fuel rebate, about half of which goes to rich mining companies. But the more glaring disgrace in public policy thinking here is the increasing spread of the idea of ‘user-pays’ public services. Roads are essential publiuc resources, and should be funded centrally, not by users. Those who don’t use roads much benefit enormously, from their use.
If this EV tax comes in, watch EV sales drive off the cliff, defeating the governments green efforts.
The thought of this ghastly tax on us is terrifying.
If some stupid bureaucrat thinks we are going to send him a photo of our odometer, ways will be devised to get around it.
This will end in tears for the albos government.
Why should ev drivers not contribute to schools hospitals and roads.
ICE vehicles are what is putting many in hospital in the first place.
you dont think EV users pay tax on their income? That they dont pay GST on good they buy? That they dont pay vehicle Rego?
EV’s will still be way cheaper to run than CE vehicles. If RUC’s deter the uptake on EV’s then those people aren’t very serious about having an EV.
An RUC should apply to ALL cars, if you dont want to avoid ev uptake, simple
Yes a RUC that applies to all would be a bit more palatable.
yeah? not impede EV uptake?
Just one simple example – how many LPG powered vehicles have been sold since they started taxing LPG for vehicle use?
Any charge being considered at all, is a big negative on the will I, wont I buy an EV next year question. The whole idea of an EV for me is to avoid the federal government charges and save money.
Also to be considered, it at least with an ICE vehicle i am paying the exorbitant fee in small amounts as i go. A lot less pain than yet another an annual bill I have to save up to pay.
People who are not rich consider price options based on what comes out of their pocket today, they dont have the luxury of considering lifetime costs / savings.
Didn’t take too long to bring this to the forefront, the ‘fairness’ in user pays.
They could have left it a bit longer though, to keep the incentive going on the overall cost / benefit of EVs.
At the moment they (BEVs and PHEVs) make up around 2.4% of overall passenger vehicle numbers in Australia (1.75% of all registered motor vehicles).
That’s not a huge considering an approx decade and a half long build up, granted most of this has been in the more recent 7 or 8 years.
Whatever new taxes labor come up with, I’m sure it will be a windfall to help them on their way, perhaps even helping in slowing the further growing record debt we are in.
Hi Les,
I agree we shouldn’t be taxing EV’s before they’re much more established.
It would be nice to see the government acknowledge the benefit to personal wellbeing and the health budget derived from EVs… but applying a new tax to stink cars for lung damage wouldn’t be politically tenable.
I’d also ask the question about how much an RUC is going to cost to administer. Could we perhaps find something better to do with our time than take photos of odometers?
Any extra revenue should be siloed for rolling out better EV charging infrastructure.
Les in Adelaide: – “They could have left it a bit longer though, to keep the incentive going on the overall cost / benefit of EVs.”
Yep. Per BITRE report Road Vehicles, Australia January 2024, from page 1:
* 21.74 M registered motorised road vehicles on 31 Jan 2024.
* A further 4.7 M caravans, trailers & plant/equipment (e.g. construction equipment, tractors & other agricultural equipment, all-terrain vehicles, forklifts, golf buggies, etc.) not included in the estimate of total registered motorised road vehicles.
* ~167,850 registered BEVs & FCEVs on 31 Jan 2024, an increase of 112% on Jan 2023. Figures include ~159,460 passenger BEVs & FCEVs, representing ~1.0% of all registered passenger vehicles in 2024.
* ~481,400 registered hybrid electric vehicles (HEVs) on 31 Jan 2024. Figures include 479,290 registered passenger HEVs, representing ~3.0% of all registered passenger vehicles in 2024.
ICEVs continue to dominate Australia’s fleet.
AEVA, like many EV groups, are arguing for a sin tax i.e. those for whom EVs are not an option (cost, range, terrain, complexity etc) be forced to pay a penalty because Other = Bad.
Those arguing for an EV tax, are arguing for a fair use charge – both EVs and ICEVs use the roads, but only ICEVs pay for this privilege. Agricultural and mining vehicles also pay for the privilege via excise+GST, but this is refunded because they don’t actually use public roads, usually.
Current EV subsidy options have made EVs more popular, but hybrids remain far more popular, and ICEVs still comprise the majority of sales. Consumer choice is clear. Unless government doubles down on its carrot and stick approach to EV v ICEVs this will not change. But push too far and voters will opt for a change in government instead – the voter is always right! 😜
The RUC has to include all motorised vehicles, from ebikes all the way up to A/B Doubles and Triples according to damage done to roads and the environment.
Recording distance can be done at places like Service NSW where odometers can be recorded in drive throughs by staff. This will create jobs (which most politicians seem to like to do). Concessions for primary producers can apply for off road use, as already applies for liquid fuels.
Above all we must finally do something about mode shift: from road to rail. Rail infrastructure must be brought up to date so that people have an incentive to travel by train rather than car. So too for freight. Current intermodal technologies are not fit for purpose.
Personal anecdote: I live in regional NSW about 4 hours drive from Sydney. Recently spoke to a diesel tanker drive decanting at a service station. He told me that he services one or two stations before returning to Sydney to reload and do another trip. Count all the costs involved there
The AEVA proposal actually makes sense: a universal RUC for all vehicles that use public roads and then fuel excise for all vehicles emitting toxic fumes and greenhouse gases. It doesn’t really matter where those are emitted, so scrap the diesel fuel rebate.
Unfortunately just because it makes sense doesn’t mean it will get implemented as the government needs to keep the majority of voters happy and that majority currently drives ICE vehicles.