In a recent development, the transport minister has revealed that the Albanese government has been diligently crafting a national road user charge specifically targeted at drivers of electric vehicles. This initiative has been in the works for several months, aiming to introduce a new tax model for EV users.

During an interview on ABC’s Insiders, Catherine King was questioned by host David Speers regarding the timeline for the implementation of this proposed tax. As the discussion unfolded, it became clear that the government is keen on establishing a framework that reflects the changing landscape of vehicle use on Australian roads.

At present, electric vehicles benefit from an exemption of the 52.6-cent fuel excise that affects drivers of petrol-powered cars each time they fill up their tanks. This exemption has prompted the government to explore alternative methods of taxation that would ensure EV drivers contribute to road maintenance and infrastructure.

The proposed road user charge would require electric vehicle owners to pay fees based on various factors such as the distance they travel, the weight of their vehicle, or even their location. This system is intended to create a fair and equitable financial structure for all road users.

“My department has been diligently working on a model for what a road user charge might entail,” King commented. “This initiative was highlighted in the Mid-Year Economic and Fiscal Outlook, and we have been advancing this work since December.”

‘That was flagged in the Mid‑Year Economic and Fiscal Outlook and we’ve been working on that since December.’

The fuel excise raised about $15.7billion in 2023-2024. EV sales have grown with 15,839 cars sold in March, marking a 42 per cent increase on the previous month.

As Australians increasingly shift to EVs, that revenue from the fuel excise is shrinking, and economists warn it is creating an inevitable fiscal black hole.

Catherine King (pictured) said the government was considering a road-user charge

Treasurer Jim Chalmers publicly flagged the issue last year, arguing Australia can no longer rely on fuel excise alone as petrol vehicles are replaced by EVs.

After a government economic reform roundtable in August, Chalmers said road-user charging was ‘an idea whose time has come’, making clear the government is considering how to introduce the policy. 

Any rollout is likely to begin cautiously, with a trial focused on heavy electric vehicles rather than everyday motorists.

Despite ongoing policy work, King insisted the government isn’t ready to implement the measure yet.

‘We’re trying to encourage as much electric vehicle uptake as we possibly can,’ she said.

‘We don’t want to disincentivise that at all.’

Speers pressed her repeatedly on timing, asking when Australians should expect to start paying.

‘So when will the government finally introduce a road user charge?’ he asked.

Speers (pictured) questioned King over when the government would introduce the charge 

King argued that now may not be the right time, politically or economically, to introduce a new tax, especially as high fuel prices and government incentives are driving surging EV sales.

‘It may not be the time for it right now. There’s a balance to be struck,’ she said.

Parliamentary reality is another complicating factor, with King admitting any national charge would require new legislation, and she’s unsure it would pass.

‘It’s obviously going to have to be legislated through the parliament. I’m not clear that there’s a pathway for it at this stage,’ she said.

The government’s caution is already causing friction with the states.

Both New South Wales and Western Australia have signalled they’ll introduce their own EV road user charges from July next year unless Canberra acts first. 

That risks a muddled system where drivers face different costs depending on their location.

‘If there is such a scheme, it does need to be national,’ King said. ‘But that’s a matter for states and territories.’

The road user charge would target electric vehicle owners, who aren’t charge the fuel excise (stock image)

King noted previous High Court rulings have cast doubt on whether states even have the constitutional power to introduce such charges.

This looming tax debate comes as the government reviews generous EV policies, including the popular fringe benefits tax exemption on novated lease, a measure critics say largely benefits the wealthy.

Asked directly whether that tax break would survive the budget, King refused to say. 

‘That’s a matter for the budget,’ she said.