Labor delays road user charges on EVs until after election

The Treasurer will delay the introduction of road user charges on electric vehicles, despite warnings that Australia’s dwindling fuel excise revenue will heap long-term pressure on infrastructure funding and revenue.

The Australian can reveal Tuesday’s budget will not tackle fuel excise reforms and the introduction of road user charges. Picture: NCA NewsWire / Dan Peled

Jim Chalmers will not introduce road user charges on electric vehicles until after the next election, despite warnings that Australia’s dwindling fuel excise revenue will heap long-term pressure on road transport infrastructure funding and revenue streams.

The delay comes as the government faces calls to take action in Tuesday’s budget, with Australian Automobile Association managing director Michael Bradley saying he would be looking to see “whether the government has a plan to ensure that everybody who uses our roads is paying their share toward their upkeep”.

While last year’s budget forecast that fuel excise collections would increase, Mr Bradley said this burden would fall upon a “smaller proportion of motorists as more people shift to electric ­vehicles.”

“While the AAA strongly supports the shift to zero and low-emission vehicles, fewer people paying more tax while others pay no tax at all is not sustainable, or equitable,” he said.

Following finalisation of the design for the government’s Nat­ional Vehicle Emissions Standard, which reduces emissions from new cars sold in Australia and encourages manufacturers to sell more electric vehicles and hybrids, Mr Bradley said Labor should “move towards road user charging to bring all motorists back into the tax system. For EVs, this could initially be at a discounted rate so as not to disincentivise take-up.”

The Australian can reveal Tuesday’s budget will not tackle fuel excise reforms and the introduction of road user charges. Any changes to the current regime would not likely occur until following the 2025 election.

It is understood Dr Chalmers has made clear to state and territory colleagues that the government understands the long-term need to overhaul fuel excise settings but there is limited appetite to tackle the problem at a time when governments are seeking to accelerate the take-up of EVs.

With most Australians still purchasing conventional vehicles, Treasury advice is that there is time to prepare a detailed plan in coming years before pressing the button on charging EV drivers with road user charges.

The 2023 Intergenerational Report showed that fuel excise receipts were expected to be 0.88 per cent of GDP by 2033–34, before falling to 0.25 per cent by 2062–63.

The “accelerated scenario” projected fuel excise receipts of 0.65 per cent of GDP by 2033–34 and below 0.01 per cent by 2057–58.

Given a lack of leadership by successive Labor and Coalition governments, state governments have unveiled plans to impose road user charges but last October the High Court declared Victoria’s road user charge was unlawful because section 90 of the Constitution provides the common­wealth with powers to impose duties of Customs and excise.

While the Reserve Bank warned on Tuesday that soaring petrol prices would drive inflation higher over coming months and flatten real wage growth, Dr Chalmers has not repeated the ­Coalition’s halving of the fuel excise rate to 22.1c per litre ahead of the 2022 election – an action that cost the budget $5.6bn in foregone revenue.

As a result, fuel excise rose in February to 49.6c per litre.

Opposition transport spokeswoman Bridget McKenzie said Dr Chalmers was “put on notice by the High Court last year that declining revenue from fuel tax receipts was his responsibility.”

“The states are rightly frustrated at the prospect of a declining revenue base for road construction and maintenance under (Climate Change and Energy Minister Chris) Bowen’s aggressive targets,” Senator McKenzie said.

“Next week, the budget needs to show what progress Chalmers has made towards a nationally applied road user contribution that is equitable and fair, particularly for those in the regions and the ­vulnerable.”