Australian EV Tax is counterintuitive and counterproductive to our goal of a sustainable future

    Less than 1% of new car sales in Australia are EVs. Compared to other similarly developed economies, we don’t even find ourselves in the top 20 list.

    I love this country, but for a place that is well recognised as being home to early adopters and lovers of technology, we’re not just falling behind, we’re not even in the race.

    With adoption well behind where it should be, the last thing you’d want to do is to introduce a new tax on electric vehicles, as this would reduce one of the biggest selling points of EVs, the dramatically lower costs per km, when compared to an ICE vehicle.

    New South Wales EV Tax

    Way back in March, NSW Treasury secretary Michael Pratt confirmed tax measures for electric cars were being considered, however at that stage, the policy was in its early days.

    South Australia EV Tax

    Come November 11th and South Australia’s Treasurer Rob Lucas, announced they would introduce a new tax on EVs starting as soon as July 1, 2021.

    Victoria EV Tax

    Most recently was the Victoria Treasurer, Tim Pallas, who on November 21st, Saturday afternoon, when all important announcements are made, announced his support for an EV tax from July 1st, 2021.

    The announcement (which is not yet on the treasurer’s website), features the headline ‘VIC TREASURER ANNOUNCES HISTORIC REFORM WITH EV ROAD USER CHARGING PROPOSAL’ on the website of Infrastructure Partnerships Australia.

    IPA is an infrastructure industry think tank who has a dedicated page on its website that highlights their vision for Road User Charging for Electric Vehicles.

    That page features the following suggestions:

    • A per-kilometre charge should be set or capped to ensure electric vehicle motorists pay no more than those paying fuel excise
    • Governments may wish to provide a time-limited discount period to encourage uptake and provide certainty for prospective electric vehicle buyers
    • Charges could be the same or different across states and territories, but should be based on the same methodology and a compatible approach
    • The charge should capture all vehicles with manufacturer-rated fuel use below 1 litre per 100 kilometres
    • The charge should be indexed in line with inflation
    • Funds raised should be retained in the jurisdiction they are raised and reinvested in maintenance and new transport capacity
    • Motorists should submit (or vehicles transmit) odometer readings every six or 12 months
    • Charges could be the same or different across states and territories, but should be based on the same methodology and a compatible approach

    Interestingly, at no point during this release do we actually get quotes from the Victorian Treasurer, instead, we get emotive and controversial statements made by Infrastructure Partnerships Australia CEO, Adrian Dwyer.

    “Today, Treasurer Pallas delivered one of the most important reforms in a generation.

    For decades politicians and policy makers have talked about modernising the way we fund our roads, but today Treasurer Pallas acted.

    At its heart, this reform is about fairness. It’s not fair that right now a family in a Mazda or Kia is paying to use the roads while a millionaire in an electric Telsa, Porsche or Jaguar gets a free ride.

    Other countries and states around the world, including New Zealand, California, South Australia, Oregon and Utah have already moved to introduce comparable mechanisms and pilots to help future-proof the way they pay for road building and maintenance.

    Applying a simple distance-based charge on Electric Vehicles will ensure every motorist makes a fair and sustainable contribution and will help secure a vital stream of transport funding for generations to come.

    While a shift to Electric Vehicles could deliver many environmental and health benefits, they don’t levitate, and should be paying to use the roads like everyone else.

    Any argument that suggests this proposal is anti-EV is just plain wrong. As Treasurer Pallas has shown we can support the uptake of Electric Vehicles while also creating a fairer funding approach.

    Independent modelling by EY shows definitively that a modest road user charge like that announced today, will not retard uptake of Electric Vehicles – which will still be cheaper to own and run than a petrol or diesel option.

    With South Australia and Victoria leading the way and NSW indicating it will soon follow, we now have bipartisan support across liberal and labor states for a modern road funding system. We look forward to other states and territories also seizing this once-in-a-generation reform opportunity.”


    Firstly, it seems strange for any Treasurer to allow a third-party organisation to speak on their behalf.

    Pallas hasn’t posted about the controversial EV tax on his Twitter account (@timpallas), in fact, he hadn’t posted at all since October 22nd, until he took the time last night to leave a reply about socks.

    Secondly, I take issue with a number of the claims in this statement, which are clearly miss-informed.

    I really take issue with the comment about EVs being for millionaires. The reality is far from the truth. The Tesla Model 3 is by far the most successful EV in Australia. In Victoria, that car starts at A$72,262 driveway. Included in that price is $2,882 in Stamp Duty.

    If you spec out all the options (including FSD) your drive away price is A$121,552. Included in that cost is $9,720 of GST and a massive $8,808 in Luxury Car Tax, as well as $4,864 in Stamp Duty and another $238 for Registration and $532 for Compulsory Third Party Insurance. That’s a total of A$24,162 in taxes and fees, so don’t let anyone tell you EV owner isn’t paying their fair share.

    From the data collected on the Tesla Model 3 Australia Facebook Group, most owners upgraded from vehicles worth between a half to a third the price of a Model 3. This means they wanted this EV so badly, that they found a way to stretch financially to afford the car, these are not millionaires, rather people often on much less than A$100,000 per year.

    By now, most techAU readers know this, but it’s worth reiterating. Personally, I saved my ass off to buy my Model 3 and when the price came in higher than expected in Australia I took the decision to refinance my home to free up equity to buy the car.

    Are there millionaires that by electric vehicles? Of course, but most people are on modest incomes, but realise the benefits of ownership. What’s important to remember is that we’ll all be electric vehicles one day.

    As the list of countries banning the sale of ICE vehicles continues to grow, automakers will have no option but to switch to manufacturing zero-emission vehicles (typically electric) or be out of business. Given Australia imports their vehicles, your next car may indeed be an EV.

    This means when we have conversations about taxing people driving electric vehicles, we’re really talking about introducing a per kilometre tax on all Australians, placing a handbrake on adoption, when we need to push firmly down on the accelerator.

    The real detail on these proposed taxes are yet to be revealed to the public, but the devil will certainly be in the detail. Don’t forget delivery vans, trucks and other parts of the logistics chains will all transition to electric vehicles, so adding a per km charge would increase the costs of goods getting to your house unless commercial vehicles were excluded.

    There are also some pretty fundamental flaws in charging people based on the suggested odometer reporting. If you’re a home owner, you already pay for road maintenance of local roads through your rates. But what about the distance you travel on private roads and long driveways, commercial carparks etc. Don’t forget about tollways, that already charge you for travelling on that road, are you now expected to pay twice?

    Some have suggested GPS tracking, however that would never pass the privacy concerns, as demonstrated recently with the sensitivity around the Covid Safe app.

    The budget

    Notice how these policies are being thrust upon us, not from the environmental minister, but instead the treasurers of each State. It’s safe to say that the Coronavirus has devastated most state and the national economy, so I understand the want to improve the bottom line.

    As Australia continues down the road of adopting electric vehicles, moving away from ICE vehicles over the next 10-15 years, Governments will see a decline in revenues created by the fuel excise.

    What’s not really well understood is that the fuel levy actually applies to a wide range of categories, some that won’t be replaced by electric vehicles.

    Generally, unleaded and diesel includes a tax of A$0.423 per litre. This levy acts as a disincentive, forcing downward pressure on the use of fossil fuels that hard the environment. The opposite would be a car that doesn’t emit fossil fuels, something like an EV.

    While the revenue from the fuel levy will decrease, many have suggested that this revenue directly funds the roads we drive on between towns and cities and without it, we’d have no roads. In reality, the billions raised are contributed to consolidated revenue.

    The Consolidated Revenue Fund (CRF) comprises of all taxes raised by the Federal Government and has been in decline for years as vehicles have got more efficient over recent years.

    This fund provides money to run our country, including the development of new road projects and maintenance of existing roadways.

    What’s interesting is how an EV tax would actually work practically as EV adoption inevitably grows over the coming years. Our friends back at Infrastructure Partnerships Australia suggests it should be indexed in line with inflation. On the surface, that makes sense, assuming the cost of building and maintaining roads grows proportionally to economic growth of the country. Doubtful.

    If a usage tax was to be implemented, lets imagine across Australia, then it would grow the tax revenue in line with EV adoption. This means the Government would have a chicken and egg problem. They want new EVs on the road to collect the per km usage charge, but EVs are more expensive than they otherwise would be, meaning it’ll take longer for more people to get into one.

    Today, EV owners enjoy almost no service costs, thanks to the dramatic reduction in serviceable components in an EV. They also enjoy substantially lower recharging costs, compared to refuelling. These two attributes play heavily in people’s ability to justify a higher up-front cost of an EV.

    Let’s imagine we go for a fair model, that could see the usage charge applied to all road users and the fuel levy scrapped. That’d certainly be a fair way to grow revenue through this transition phase, but as more owners become EV owners, will the price per km go down?

    That approach also has a fairly obvious negative consequence – the environmental damage of cheaper legacy fuels, sending the opposite message to consumers and business about our environmental outcomes.

    These plans to rethink funding are also found way back in Feb 2016 in the Infrastructure Australia Plan. This suggests ‘direct user charging for all vehicles within 10 years, alongside the removal of existing taxes and charges, should be a priority for Australia’s governments to provide greater fairness and equity in how we pay for roads.’

    The Government replied to this plan in November 2016 which included this statement from Page 35. ‘Consistent with its response to the Harper Competition Policy Review in November 2015, the Australian Government is progressing work to investigate the benefits, costs and potential next steps of options to introduce cost-reflective road pricing for all vehicles.’

    Think EVs are bad, wait for autonomy

    While the focus on everyone’s minds today is the loss in tax revenue from fuel, take a moment to consider what’s about to happen to the income generated from road users breaking the law.

    Speeding fines could go to zero.

    Back in 2019, ABC reported that a single speed camera in Clayton, netted more than 4.1 million dollars for the Victorian Government. As autonomous vehicles become a reality across the next decade, we should also be planning on this income evaporating as well.

    Autonomous vehicles will do the speed limit and we already see the technology in place today, where vehicles can read the posted speed sign and adjust cruise control to that speed. Today drivers can override that speed, but in the future, expect no human to be driving and rideshare services to be done safely, at the posted speed limit.

    My point here is this, the automotive industry is changing fast as technology provides new opportunity, so we best get ready to rethink the whole thing.

    Everything from funding to how we design our cities, this is well overdue. We don’t need Think Tanks, we need decisions, ones that put the guidelines in place for a successful future.

    The best thing our politicians could do right now is focus on inviting more EV automakers to ship their products into Australia. There’s a number of great vehicles, powered by electric motor trains, that simply aren’t available here.

    Timeline of EVs

    While we’re talking about the current situation with electric vehicles, it’s also worthwhile remembering the history of events that has lead us to this point, starting back in 1996.

    1996Launch of the limited production General Motors EV1[32]
    1997Launch of the Toyota RAV4 EV[33]
    December 2008100th Tesla Roadster delivered[34]
    December 2010Nissan Leaf and Chevrolet Volt deliveries began[35]
    December 2012Annual global sales passed the 100,000 mark[21][24]
    March 2014Norway achieves 1% of cars on the road as plug-ins[25]
    October 2014EU adopt the Alternative Fuels Infrastructure Directive in 2014.[36]
    December 2014100,000th plug-in sold in Japan[21][37]
    September 2015Cumulative global plug-in sales passed 1 million units.[38]
    500,000th new energy vehicle sold in China[39]
    (includes heavy-duty commercial vehicles)

    100,000th plug-in sold in Norway[40]
    May 2016500,000th plug-in sold in Europe[41]
    August 2016500,000th plug-in sold in the U.S[42]
    September 2016500,000th new energy passenger car sold in China[43]

    Global all-electric car/van sales passed 1 million.[44]
    October 2016100,000th plug-in sold in France[45][46]
    November 2016100,000th plug-in sold in the Netherlands[47]
    December 2016Cumulative global plug-in sales passed 2 million units[3]

    5% of passenger cars on Norwegian roads are plug-ins[17]
    November 2017Cumulative global plug-in sales passed 3 million units[4]
    December 2017Annual global sales passed the 1 million unit mark[9][27]

    Annual global market share passed 1% for the first time[9][27]
    First half 20181 million plug-in electric cars sold in Europe[48]
    1 million plug-in electric cars sold in the U.S.[49]

    2 million new energy passenger cars sold in China[50]
    (includes heavy-duty commercial vehicles)
    October 201810% of passenger cars on Norwegian roads are plug-ins[19]

    Netherlands has the highest density of EV chargers (19.3 chargers per 100 km of paved road)[51]
    November 2018500,000th plug-in car sold in California[52]
    December 2018Annual global sales passed the 2 million unit mark[8][53]

    Annual sales of EVs passed 1 million in China[54]

    Cumulative global plug-in sales passed 5 million units[5]

    USA reaches highest monthly EV sales of 50,000[55]

    Tesla Model 3 becomes first EV to exceed 100,000 sales mark in a single year[56]

    China surpasses 200,000 electric car sales in a single month[57]
    March 2019Europe surpassed 60,000 electric car sales in a single month for the first time[58]
    June 2019China’s Electric Vehicle Charging Posts surpasses 1 million[59]
    December 2019China raises EV target to 25% EV sales by 2025[60]

    Germany passes Norway becoming Europe’s largest EV market in 2019 by annual sales volume (108,839)[61]
    July 2020For the first time in the EU, more than 200,000 electric cars are sold in a single month[29]

    The Victorian Treasurer will provide an update to the budget tonight, one that’ll definitely be worth watching to see if there’s confirming and clarification of how this EV tax would work.

    Jason Cartwright
    Jason Cartwright
    Creator of techAU, Jason has spent the dozen+ years covering technology in Australia and around the world. Bringing a background in multimedia and passion for technology to the job, Cartwright delivers detailed product reviews, event coverage and industry news on a daily basis. Disclaimer: Tesla Shareholder from 20/01/2021


      • Electric car owners have paid more than our fair share of tax at the time of purchase. This tax is comprised of luxury car tax, GST and stamp duty. The luxury car tax and GST are collected by the federal government just like the fuel levy is. Electric cars are more expensive right now than the equivalent fossil fuel powered car due to the cost of batteries. They are not luxury cars but are considered by the uniformed bureaucrats to be in this category due to their price. I upgraded from a 2001 VX Series 2 Holden Commodore to a Tesla Model 3 just over 1 year ago. I bought an EV to reduce my personal impact on the environment and would like my descendants to live in a world which is better than today instead of a post apocalyptic industrial disaster. BTW I used to work in the Oil & Gas Industry so I know first hand the environmental damage caused by the extraction, refining and burning of hydrocarbon fuels.

      • The idea that petrol and diesel car owners pay their fair share is absurd. The fuel excise tax collects around $12 billion/yr and it goes into general revenue. A recent IMF report estimated Australian taxpayers subside fossil fuels to the tune of $29 billion/yr. We could redress the current revenue shortfall simply by ending just a tiny amount of these subsidies. A tax on EVs will result in the perverse situation where EVs will be subsidising fossil fuels. Even with the whole vehicle fleet transitioned to electric, ending fossil fuel subsidies alone will result in a big revenue increase not a decrease.

    1. It is quite sad how easily manipulated the Australian psyche is around its collective notion of ” a fair go”. Governments politicians and other interest groups often use this sometimes unfortunate attribute to maintain the status quo and stifle anything that challenges the current business models.

      The irony on these State based revenue measures on EVS to supposedly replace lost road user tax is that states collect their road revenue from licence fees which EV owners pay and as it is usually based on weight and EVS tend to weigh more the registration and licence fees are generally higher (except in ACT) for this type of vehicle.

      In addition Fuel excise is collected by the Federal Government and as you pointed out in your article passed into General revenue and not hypothecated back to states so states collecting taxes on the basis that EVs are not paying their fair share is collecting tax that they currently don’t receive in any case.

      Of course EVs and light vehicle classes do very little damage to our roads in any case as most maintenance and repair is caused by commercial trucks and heavy vehicles, chasing EV owners to pay their “fair share” is an absolute furphy!

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