Getting road user charging right for Victoria

Electric vehicle charging


Posted April 08, 2021

The Victorian Government is pressing ahead with its plan to establish a road user charge for electric vehicles (EVs).

If it passes the upper house unamended, the new legislation will see EV owners pay 2.5 cents for every kilometre they drive, and owners of plug-in hybrids will pay 2.0 cents. While some see this as controversial, there is nothing new about taxes that help pay for our roads, though some are more obvious than others.

Politicians don’t like to talk about it, but every time you fill up at the bowser, you pay 42.7 cents per litre in fuel excise. In this financial year, the Commonwealth will collect $11 billion from this tax alone.

Owners of pure electric vehicles, which do not require liquid fuels, don’t pay fuel excise, while those driving plug-in hybrids pay much less than people driving traditional internal combustion engines.

It makes sense that as we adopt new vehicle technologies such as electricity and hydrogen, governments need new ways to fund our roads.

Electric and other low emission vehicles are the future of motoring in Victoria. RACV has previously called on state and federal governments to work together and start planning for this change because the pace of technological uptake can change quickly. Avoiding tough decisions will only make things harder down the track.

Photo of EV charging station

New legislation could see EV owners pay 2.5 cents for every kilometre they drive, and owners of plug-in hybrids pay 2.0 cents.

What’s more, fuel excise is already inequitable because different cars use fuel at different rates; meaning two motorists pay different amounts of tax to use the same piece of road. Distance-based charging is a fairer, more sustainable way to pay for our roads. And as EVs become the norm, rather than the exception, it makes sense to bring them into the taxation system now, to help pay for better, safer roads

Victorian Treasurer Tim Pallas has said the new distance-based rate will ensure that everybody pays a fair charge for the use and the wear and tear on our road network.

While a road user charge for EVs is a sensible step, it should not be done in a way that discourages Victorians from purchasing cleaner, greener technology. For this reason, the Government is right to offset the new distance-based charge with incentives such as discounted registration. Equally important are its investments in new electric vehicle re-charging infrastructure; and plans to ensure access to vehicle-charging in new buildings.

But new research commissioned by our national body, the Australian Automobile Association, shows that a charge of 0.8 cents per kilometre, coupled with the proposed $100 registration discount, would result in a net incentive to new buyers of EVs. The Government’s proposed 2.5 cents/km will not. 

In addition to a lower rate, the Victorian Government should consider two other changes that would make the new distance-based charge fairer, less confusing, and cheaper to administer.

Firstly, any new charge should only apply to EVs purchased after it comes into effect, with EVs already on the road remaining exempt until sold and purchased by a new owner. 

Secondly, the same rate per kilometre should apply to all cars consuming less than 2 litres of fuel per 100km, no matter what technology powers them.

A bright, increasingly electric, future is coming to Victoria. As we move to ensure all road users contribute fairly to maintaining and improving our road network, let’s make sure we get it right.