Motorists propping up a $25bn fuel tax grab as electric car drivers get ‘a free ride’ by dodging payments

Cash-strapped motorists in outer suburbs are propping up a $25bn fuel tax grab as electric car drivers get “a free ride” by dodging payments.

RAA chief executive officer Nick Reade says all road users should fund infrastructure. Picture: RoyVPhotography

Cash-strapped motorists in outer suburbs are propping up a $25bn fuel tax grab as electric car drivers get “a free ride” by dodging payments.

The RAA and Mitsubishi Motors Australia are urging national motoring tax reform to ensure fair funding of road maintenance – South Australia has a $2bn, 2100km backlog.

Fuel excise, a 50.8 cent tax on every litre purchased by motorists, is estimated to reap $24.69bn in 2024-25, according to federal budget figures.

But this is forecast to decline by $470m during the next four years alone because of a New Vehicle Efficiency Standard that came into effect on January 1.

Electric car owners, mostly concentrated in Adelaide’s inner suburbs, do not pay fuel excise, prompting calls by the RAA and Mitsubishi for a road user charge to help fund critical road infrastructure.

A long-term decline in fuel excise is forecast to continue for the next 25 years, according to a federal Parliamentary Budget Office report from late 2024, as less fuel is bought because of the growth in electric and plug-in hybrid vehicles.

Holden Commodores are the most-owned petrol car model across large parts of Adelaide’s outer northern suburbs, along with large parts of the northwest and south.

RAA chief executive officer Nick Reade said all road users, not just petrol and diesel vehicle drivers, should help pay.

“EVs and hybrids use less fossil fuels which is great for the environment and the sustainability of transport – something RAA wholeheartedly supports,” he said.

“However, it also means because they’re not paying for fuel, or they’re refuelling far less often, they’re not contributing their fair share to the only existing federal revenue stream to fund our roads: the fuel excise.

“That’s not fair and we believe everyone who uses our roads should help to pay for them.”

Mitsubishi Motors Australia CEO Shaun Westcott. Picture: Brett Hartwig

Mitsubishi Motors Australia chief executive officer Shaun Westcott called for an overhaul of the “plethora of taxes” applied to car purchase and operation with “a form of equitable payment”.

“There’s a saying in economics: ‘There ain’t no free lunches’ and at the moment people who have EVs are getting a free ride,” he said.

“The reality is that somebody has to fix our roads. We all want to ride on decent roads and good roads, and a lot of our roadside fatalities and road toll in this country is attributable to poor road conditions.

“Maintaining and improving our road infrastructure is critical for the success of Australia, to keep the wheels of our country turning.”

Mr Reade told the 2024 Advertiser Building a Bigger, Better South Australia forum the road maintenance backlog would spiral out of control without federal intervention to generate revenue from EV drivers.

Some revenue from a national road user charge could be used to fund initiatives to promote the uptake of electric and plug-in hybrid vehicles, Mr Reade said, including extending the fringe benefit tax exemption for PHEVs due to end in April.

The RAA and national counterpart, the Australian Automobile Association, are calling for the federal government to use as a starting point a NSW road user charge on EVs, starting by mid-2027.

An RAA survey shows 64 per cent of respondents support a road user charge to replace fuel excise, while 72 per cent want more road maintenance funding from state and federal governments.

Originally published as Motorists propping up a $25bn fuel tax grab as electric car drivers get ‘a free ride’ by dodging payments