Should Australia tax electric vehicles?

Victoria and South Australia are seeking to impose levies on electric car users to compensate for not having to pay fuel excise, arguing they should help pay for road maintenance.

However, the Greens have tabled legislation in the Senate aimed at discouraging these measures, arguing they will impede the move to net zero emissions and will deter people from buying electric cars.

The Electric Vehicle Council (EVC) also argues the federal and state governments have created a hostile environment in Australia as far as electric vehicles are concerned.

From The New Daily:

Senator Rice’s bill seeks to establish a new condition on financial assistance provided by the Commonwealth government to neutralise the revenue effect of “taxes and charges imposed by states and territories on the purchase and use of electric vehicles”.

If passed, the legislation would see the Commonwealth deduct any revenue raised from taxing EVs from the amount of money it would normally pay the state that raised this revenue.

“We can’t stop the state governments from doing it. But the feds would be able to make it not worth their while financially,” Senator Rice told The New Daily…

EVC chief executive Behyad Jafari laid the blame for Australia’s lacklustre EV uptake at the feet of its politicians.

“There’s simply no sugarcoating it at this point – Australia has marked itself out as a uniquely hostile market to electric vehicles,” Mr Jafari said.

The key issue here is that Australian motorists paid $19.68 billion in fuel excise tax in the 2019 financial year. And with the EVC forecasting that 50% of new cars sold in 2035 will be electric, governments are facing a big budget black hole:

Electric vehicle sales are predicted to boom in Australia over the next 20 years.

This budget black hole will arise because the shift to more efficient conventional vehicles and electric vehicles will cause fuel excise receipts to collapse:

The move to more efficient conventional vehicles and electric vehicles will cause fuel excise receipts to collapse.

This will inevitably mean that policy makers will be forced to shift to some form of direct road user pricing to cover costs.

The Victorian Government has imposed a 2.5c a kilometre charge on EVs. This is still a bargain compared to the 42c per litre paid by conventional motorists using petrol and diesel vehicles. Even after these EV charges, conventional motorists will contribute far more towards road cost recovery than their EV counterparts.

But this is a stop-gap measure only and governments will still need to shift to full direct road user charges. Indeed, the EVC sees direct road user charges as “inevitable”:

The EV industry accepts that a road user charge is inevitable as the car fleets transition to electric, but argue it should be introduced fairly and evenly.

The EVC should be careful what it wishes for. Because if direct road user pricing comes into effect and fully recovers the cost of road provision, then EV owners would very likely pay much more than 2.5c a kilometre.

In other words, the EVC and the Greens should stop complaining.

Unconventional Economist
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    • Welcome to Sydney, the most tolled city in the world.

      We should be able to claim the 46c/litre fuel excise back on kms driven on toll roads.

  1. Happy to pay this if ICE engines are taxed for their carbon output? That seems fair eh?

    • JonathanMEMBER

      And all external costs such as pollution and associated medical conditions. No other countries have imposed taxes so early in the adoption phase. Infact it has been the opposite. This is less about the economics and more about prevailing industry driving government policy (again).

      • +1 When the purchase cost (double an ICE) and electricity costs, plus the absolute dearth of charge points in regional areas, so that the EV owner is forced to drive and register a 2nd vehicle – no blooming wonder there’s a paucity of EV take up in Oz – do they care? Not one iota.

    • Cynical snake

      There’s this thing called fuel excise, it is directly related to co2 output…

        • Cynical snake

          it’s levied per litre of fuel, so is directly related to co2 output and only correlated with use.
          A charge per Km would be levied on use.
          Marketing [email protected] for what the intention of it is is a can of worms I’m not going into.

    • Display NameMEMBER

      Now that’s a good idea. Speed up the transition. Will need to be somewhat assisted by govt I suspect, but logic makes sense.

      • So should there be a tax for BEV charged from Morwell powerplant?
        That’s about 2x more CO2 per km than your 3L/100km modern diesel ICE

      • Tax is in my opinion justified if to maintain the utility ie the roads.
        Higher tax on heavy vehicles.
        Pushing carbon dioxide as poison when it’s needed and used in photosynthesis is a terminal life action.

    • UpperWestsideMEMBER

      Funny thing is – there is hardly any congestion anymore.
      The first dip was the 2000 crash ( before that it could take two hours just to get out of midtown to a bridge)
      Right now other than early morning school drop-off oil the Upper Eastside (private schools are still open) and the cars driving in from CT ( which is soon to end as everyone moves their office out of NYC) its basically empty – looks like Bogabri on a Sunday morning.

      • I'll have anotherMEMBER

        Lol Boggabri.

        Worked there as a consultant for about a year when they built the new mine. What a shithole of the world that joint is.

  2. drsmithyMEMBER

    If we’re going to restructure how roads are funded, then it’s obvious that heavy vehicles should bear the bulk of the costs since they cause the bulk of the wear and tear.

    Disincentivising the uptake of EVs in any way is madness.

    • If incentive goes similar route like Car-Lux-Tax and makes it free road use for BEV under $25k and introduce Coal-powered tax for all, perhaps it would be an incentive, not a free lunch for the top 10%.
      BEV are the top 10%’s toys and not taxing them is a nice way to make poor pay for the virtue signalling of the astute.

      • drsmithyMEMBER

        The less disincentive, the sooner they hit the market and the sooner they are available to “the poor”.

        What is your objective with EVs-specific taxes ?

        • There’s a reason behind qld ‘per cylinder’rego cost and nsw’s per kg weight.
          But a nice straw man there u used .

          I’ll repeat that for you, for mass adaptation of bEV, common 500km capacity car needs to be roughly under $25k and keep the resale value like a Camry or Corolla. Those cars should be incentivised, not $80k rich man’s virtue signaling toys that are charged by burned coal.

          • drsmithyMEMBER

            But a nice straw man there u used .

            You know “straw man” actually has a meaning, right ?

            I’ll repeat that for you, for mass adaptation of bEV, common 500km capacity car needs to be roughly under $25k and keep the resale value like a Camry or Corolla.

            The range argument is a furphy. Less than half that would be enough for mass takeup of small EVs to replace existing second vehicles.

            The quicker EVs see mass adoption, the quicker they will become cheaper.

            Those cars should be incentivised, not $80k rich man’s virtue signaling toys that are charged by burned coal.

            The discussion here is about not disincentivising EV takeup. And even if $60k +/- $25k EVs were “rich man’s virtue signalling toys” it’s still unclear why you would want to discourage people from buying them in any way.

  3. Cynical snake

    I can’t help but think that EV predicted adoption rate looks a lot like the inflation, jobs and GDP prediction graphs the RBA loves putting out. Where they involved in any way and is it likely to be as accurate?

  4. tsport100MEMBER

    NSW is the only state in Australia that requires annual vehicle safety inspections, and even that only applies once the vehicle is 5 years old, so how do other states propose to gather mileage data from private vehicle owners in order to calculate the tax?

    • Cynical snake

      And even more to the point, how do they expect to stop people from disconnecting the odometer if given financial incentive…

      • Can someone with knowledge of the situation indicate whether EVs can “disconnect the odometer”

        • Cynical snake

          pull the fuse to the dash cluster would presumably disable it.
          A bit of technical knowledge you could disable the speed sensor.
          A Tesla would probably have a hissy fit, call the mothership and refuse to drive though.

      • drsmithyMEMBER

        Fines, same way they do now.

        Practically speaking, the proportion of people able to do this is so small it’s irrelevant.

        When was the last time you worried about the odo being wound back buying a car ?

        • Cynical snake

          Never, but given the number of times I have seen it disabled on a hire car I wouldn’t be expecting a legit reading if purchasing an ex hire car though.
          Most people have minimal incentive to actually do this currently.
          I’d imagine a usage charge amounting to a few hundred dollars a year would result in an enourmous reduction in the total kilometres driven by the car fleet. At least reported.

          • drsmithyMEMBER

            Never, but given the number of times I have seen it disabled on a hire car I wouldn’t be expecting a legit reading if purchasing an ex hire car though.

            FMD. Where are you renting your cars from ? Dodgy Bloke’s Rustbucket Emporium ?

            Most people have minimal incentive to actually do this currently.
            I’d imagine a usage charge amounting to a few hundred dollars a year would result in an enourmous reduction in the total kilometres driven by the car fleet. At least reported.

            I bet it wouldn’t.

            It may not even be possible in EVs. It would void warranties. Most people lack the skills to do it themselves and reputable mechanics won’t do it for them. It’s already illegal and punishment is fairly serious (criminal charges, $10,000s fines).

            It’s a lot of risk and hassle to save a small amount of money.

          • Winding back the odo became redundant when all ICE reached the point where these can easily drive over 500000km without major engine overhaul, about 20yrs ago or before. For this and other reasons the market for winding back died. There is no major difference between 150000km car and 250000km car under the bonnet if it was properly serviced (and proper service that cannot be correlated to km’s driven)
            “Winding back” the odo has become so easy, they teach that in Bulgarian primary schools during technology classes. Sometimes it can be done online. If one was that much idle, one could wind back the odo before every service at the dealers and legalise wound-back mileage. But who wants this?

          • Cynical snake

            It aint the hire place disabling it, they often charge by the klm and sometimes quite significantly.

            Low k’s help the resale though so no real incentive for them to make it harder to do either.

            and regarding voiding warranties, oops the connector must have fallen out, you better fix that, is quite literally all it takes…

    • drsmithyMEMBER

      It’s pretty trivial – require reporting the odometer reading to renew registration. Tax is payable at that time.

      In reality the most likely outcome is mandatory GPS trackers to track mileage. Which would subsequently be used for time-and-location-specific congestion charging (MB loves this idea despite it’s massively regressive nature), shortly thereafter for the automated issuing of speeding, parking, and other vehicle-related fines, and probably not a whole lot longer after that for police fishing expeditions in the war on some drugs.

      • kannigetMEMBER

        Stop being logical you know there is no room for that here….

        What is interesting is that according to this report revenue was only $10.8B in 2013-2014 and they were already complaining it was falling…. despite that now its fallen all the way up to $19B.

        Yes, it will start to decline as more and more electric vehicle use the road, I would be Ok with a usage based charge as long as it is reasonable and doesn’t recreate the current system where it is equitable. The current system means that users with more resources can afford to upgrade vehicle and as a result pay less per Klm due to improved efficiency.

        We also run the risk that allocating charging usage and allocating it to areas of higher usage results in ever degrading road maintenance in areas that have limited usage, which in turn results in even less usage.

      • @ DRSM

        you forgot to include the penalty for thinking about going over the speed limit and what happens if US decides to turn off the GPS (which they still do, now and then)

  5. MathiasMEMBER

    Turning a Komby into an Electric Car

    Would be kind of cool if you could throw some solar panels on your roof and be recharging your car from sun solar while its parked. Guessing the power is so trivial that roof solar wouldnt be enough to charge the batterys?

    With Real Estate going up in price and every Australian being forced to live in a Van, I can only imagine we will be seeing forced innovation into the Home Solar Van ideas heh.

    A thought just popped into my head earlier, of a huge road train of Vans blocking off a major Australian Highway in protest over high Real Estate Prices ha ha.

  6. reusachtigeMEMBER

    Yeah I hate electronic vehicles! Tax them severely!! Call it the homo tax if you like.

  7. If EVs are powered by coal electricity they shouldn’t be subsidised.
    I imagine fig 9 regarding fuel consumption for passenger cars dropping 1l/100km from 01-17, mustn’t class 4WD as passenger cars because observationally there are now more large cars on the road and statistically ‘passenger/SUV ratios have inverted over the last 10 years. We are being forced to buy over-sized cars to protect ourselves from over-sized cars.

    • drsmithyMEMBER

      I’m pretty sure “passenger vehicles” includes SUVs.

      Modern large SUV fuel economy is as good, or better, than the older large sedans and station wagons that they are replacing. A contemporary medium SUV (Tiguan, CX5, RAV4) has similar or better fuel economy to a small hatchback (Mazda 3, Golf) of 10-15 years ago. Takeup in diesel is helping this stat as well.

      • darklydrawlMEMBER

        Drove Melb – Adel – Melb back in Jan in a current model Subaru Forester. Avg Fuel consumption (91 ron ULP) was 6.5 l/100 km and I drive enthusiastically. If I did the pensioner thang at a flat 90 km/hr I reckon I could get it close to 5 l/100 km. Weather was mild and not too windy which would have helped somwhat. As did leaving Melbourne pre dawn to avoid the traffic.

        That said, would swap for a decent EV tomorrow (Those Iconiq 5’s look tempting! Teslta Model X? – hell yeah.)

        • drsmithyMEMBER

          (Those Iconiq 5’s look tempting! Teslta Model X? – hell yeah.)

          The Ioniq 5 has thrown a spanner in our new car plans (that we already had to put on hold when I got made redundant late last year), since it’s supposed to be here in Q3 and with a 3m wheelbase, looks great as a family car without having to step up to the extra size of a real 7 seater.

          The Tesla Model X is a whole other ball game though. Twice the (expected) price of the Ioniq 5.

          The poor old Golf has seen us through ten years now, I guess another few months to wait and see won’t make much difference.

        • UpperWestsideMEMBER

          I have been holding on for a real EV as well. My old R350 ( very low miles – its a shopping and ski trip only car) is finally falling apart due to Bill offing Be Blaisio and his potholed roads policy ( at least Bloomberg knew what tar was used for).
          But with kids and a ton of gear I need something big ( and the R350 is a huge boat ).
          Also EV adds another USD9k a year for parking ( I was paying 9k to park the boat until COVID and now I just park on the street).

  8. PalimpsestMEMBER

    OK, just to rev everyone up again. My EV emails me a monthly report that includes km driven, maximum and average speed, plus electricity consumption. Try.disconnecting THAT odometer.

    Most if not all of my electricity is green but even if it was 100% coal sourced it would be one third of the emissions of the diesel.

    Who wrecks the roads and doesn’t pay enough? Drive past the truck weigh station at Marulan and you’ll see.

    • Cynical snake

      “Try.disconnecting THAT odometer.”
      I’d imagine unplugging the connector into the speed sensor would do it quite well. your reports would probably have a lot of 0 in it though.
      And sure the manufacturer could disable the car if it doesn’t work, but it’ll be fun when your car stops in the middle of the road if it ever has a problem.

    • if it was 100% coal sourced it would be one third of the emissions of the diesel.
      How do you know?

      • darklydrawlMEMBER

        I don’t have the numbers on hand, but folks smarter than me have done the maths on this. The simple answer is a power station is massively more efficient than an individual engine.

        • Jolly good, I suspected so.
          I also don’t have numbers on me but the folks smarter than all us combined have said that when ××all×× factors are included, the whole co2 difference from modern ICE melts down and becomes negative, particularly negative when coal powered plants are charging bEVs.

  9. Excise is a Federal Tax.EV tax is a state based one. It’s nothing more than a money grab by the states.

    If this comes in, Australia will be the only country to have scrapped a carbon tax and the key key country to introduce EV tax that doesn’t apply to ICEV’s. It’s no wonder the rest of the world hates us.

    • darklydrawlMEMBER

      It’s shameful isn’t it. We are not going to look good in the history books.

  10. Wait, the fuel excise is used for road improvement? What, all of it? I thought most of it went into consolidated revenue.

  11. UpperWestsideMEMBER

    If they road price based on costs the Truckers will have a fit. A 16wheeler does a ton more damage than the equivalent weight in cars due to the concentration of the weight and the plastic vs elastic nature of the road bed structure.
    I am old enough to remember the NSW govt trying true cost pricing for trucks in the 70’s 0- they lost.

  12. Electric cars are essentially a con where the poor subsidise the rich. Not to mention in Australia where if you check AEMO any time of the day the grid is 70% coal, so not exactly clean.

      • Well speaking generally about policies internationally. The poor man pays all manner of fuel taxes with a regular car etc, while the rich gets a nice tax subsidy for his expensive EV, ability to drive his EV vehicle in HOV lanes even though he may be the only one in it, cheap/free parking in city centers, business subsidised charging etc. In short a whole bunch of things that are not going to scale when everyone is driving bEVs.

  13. tsport100MEMBER

    This tax threat is the political response to derail calls for EV subsidises
    Meanwhile, the Feds are flat our subsidising tradie utes… instant asset write off, full tax deduction for vehicles over 1T and to no-ones surprize utes dominate the top 5 best selling ‘cars’ listings and the #1 selling ‘car’ for the past 5 years has been a Toyota Hilux ute…
    If the feds had put the same level of tax subsidy into EVs, Australian roads would look more like Norway where 50% of all new car sales are BEV.