EV drivers to be hit with new road users charge
The free ride enjoyed by drivers of electric vehicles is coming to a close with Treasurer Jim Chalmers and state governments fast-tracking plans for a new road-user charge.
The Treasurer has long flagged the development of a new road-user charge across Australia for drivers of electric vehicles to ensure EV drivers are contributing a fair share to road upgrades.
Now the government, state treasurers and industry experts are gathering to hold high-level talks on how a new road user charge will work ahead of next week's economic roundtable in Canberra.
All Australian motorists who buy petrol and diesel at the bowser pay 51.6 cents a litre in fuel excise.
Based on a planned NSW road user scheme, a national rollout will depend on your mileage but might cost between $300 and $400 a year.
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A new charge could be coming for EV drivers in Australia. Picture:NSW officials have forecast $73 million in revenue from the road-user charge for the 2027-2028 financial year – increasing to $141 million the following 12 months.
The Infrastructure Partnerships Australia road-user charging forum in Sydney this week will include officials from the NSW and Victorian Treasury departments, the Productivity Commission, Transurban chief executive Michelle Jablko and Australian Automobile Association managing director Michael Bradley.
Victorian Treasurer Tim Pallas said that electric vehicles are 'heavier and do more damage to the road network as a consequence than do internal combustion engine vehicles'.
'But there's an environmental plus to electric vehicles,'' he told The Australian.
'So getting that balance right was key to us. The way we figured it, (a road-user charge) came in about half of the equivalent costs of fuel excise and that's not counting the incentives the state was putting into the vehicle purchase or registration for low-emissions vehicles,' Mr Pallas added.
The Productivity Commission has urged the Albanese government to take action over declining fuel excise revenue amid spiralling rising maintenance costs.
'By giving drivers a clear signal about the cost of infrastructure, they would have an incentive to use it more efficiently,' the Productivity Commission report said.
The Treasurer has made no secret of his support for a shake-up of the current system before the election, raising the idea with business leaders in February.
'We will also continue to work with states and territories on the future of road-user charging,'' Dr Chalmers said in June.
'All of this represents a big agenda on the supply side of our economy. None of these reforms are simple.'
A new charge could be coming for EV drivers in Australia. Picture:How does fuel excise work?
The current rate of fuel excise is 51.6 cents in excise for every litre of fuel purchased.
For a typical household with a car running on petrol, the tax costs more than $1200 a year.
But the flat sales tax isn't paid by drivers of pure electric vehicles, who simply need to plug in their cars to recharge.
While registration and driver's licence fees go to state and territory governments, fuel excise is collected by the federal government.
Australian motorists paid an estimated $15.71 billion in net fuel excise in 2023-24, and are expected to pay $67.6 billion over the four years to 2026-27.
However, governments have long-warned that a road-user charge will be required to fill the gap in the budget left by declining revenue from the fuel excise, as the petrol and diesel engines in new cars consume less fuel and Australians adopt hybrid and electric cars.
What does the AAA say?
The Australian Automobile Association (AAA) is calling for a national approach to road-user charging but wants a guarantee the revenue will be earmarked for road upgrades.
The AAA backs a distance-based road-user charging as a fairer and more equitable way to fund land transport infrastructure.
The 2024 federal budget forecasted a reduction in fuel excise receipts by $470 million over four years from 2024-25.
Federal Treasurer Jim Chalmers is fast-tracking plans for a new road-user charge. Picture: NewsWire / Martin Ollman
Roadblocks to reform
Currently, New South Wales is the only state with firm plans to introduce a road-user charge from 2027 or when EVs reach 30 per cent of new car sales.
Plug-in hybrid EVs will be charged a fixed 80 per cent proportion of the full road-user charge to reflect their vehicle type.
Western Australia has also stated an intention to implement a road-user charge.
Meanwhile, Victoria's electric vehicle levy had to be scrapped following a ruling from the High Court.
Two Victorian electric car owners launched a legal challenge on the basis the tax was not legal as it was an excise that only a federal government could impose.
They won with the High Court upholding the legal challenge.
There have been several false starts to enshrine a road-user charge including in South Australia, where the former Liberal Government planned to introduce a charge for plug-in electric and other zero emission vehicles, which included a fixed component and a variable charge based on distance travelled.
It was later pushed back to 2027 due to a backlash before the legislation was ultimately repealed.
'Gold standard' for reform
Some experts argue the gold standard for reform is a variable rate that factors in the vehicle's mass, distance travelled, location, and time of day.
But there's a big barrier to the Commonwealth imposing those charges because the Constitution prohibits it from imposing taxes that discriminate between states or parts of states.
State governments could impose those levies, but as the experience of the Victorian Government underlines, it is legally complex.
Originally published as Plans being fast-tracked for new road user charge for EV drivers
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7NEWS
8 minutes ago
- 7NEWS
Electric vehicle tax: Road user charge to offset fuel excise losses could be coming soon
Rarely do Australians collectively put up their hands to volunteer for a new tax. But it appears to be happening in the automotive industry, with disparate groups calling for the introduction of a road-user charge for electric vehicles to support the nation's future transport needs. It is a proposal likely to be debated this week at the federal government's productivity roundtable after Treasurer Jim Chalmers signalled his support for future changes. But while infrastructure and transport groups agree on a road-user charge as a concept, they disagree on when it should be introduced, who should pay and whether petrol and diesel vehicle drivers should be charged more. While some argue the fee should only apply to electric vehicles not subject to fuel excise, others say a road-user charge would be more effective if applied to every vehicle. The debate over transport taxes follows record EV sales. Australians purchased more than 29,000 of them in the three months to June, according to the Australian Automobile Association, representing nine per cent of all car sales. It also comes amid falling fuel excise collection, which raised $15.71 billion in the 2024 financial year but could fall to zero by 2050 as electric vehicles replace fuel-powered cars, the Parliamentary Budget Office warns. Urgent changes are needed to address Australia's dwindling tax revenue for roads, Infrastructure Partnerships Australia chief executive Adrian Dwyer says. Groups attending a roundtable on the issue last Monday widely agreed the current system for charging motorists was 'unfair, unsustainable and inefficient,' he said. 'A distance-based charge on light EVs is the logical starting point. 'Heavy EVs can be included but starting there alone won't address the issues structural to this debate, namely the core issue of fairness as more light EVs join the fleet.' But making electric vehicle drivers pay for all lost tax revenue would also be unjust, according to Polestar Australia managing director Scott Maynard. Fuel excise collection has been dropping for many reasons, he says, including more efficient internal combustion engines. 'Petrol cars ... have come down and down in their usage of fuel; their economy has improved and it would be unfair to try and recoup all of the targeted fuel excise revenue strictly from electric vehicle drivers,' Maynard said. 'To simply, in a really ham-fisted way, nail an addition cost to electric vehicles only at a transitional point where we're trying to get people to consider them as a true alternative to traditionally powered vehicles that pollute our air, is not the way to do it.' Adding an ongoing charge to electric cars at early stage in their adoption could make potential buyers reconsider or delay purchases, Maynard said. It is a concern shared by the Electric Vehicle Council, legal and policy head Aman Gaur says, which supports the introduction of a road-user charge but at a suitable time and if introduced for all vehicles. 'We support fair funding of our roads but I think there's been really important considerations that have been left out of what I would call a pretty shallow debate about fuel excise at the moment,' he says. 'We would only support a road-user charge if it's universal; universal and focused on emissions intensity.' Any road-user charge should apply to all light vehicles, Mr Gaur says, and should only be introduced to electric cars when their adoption hits 30 per cent. Several state governments have floated plans to introduce a road-user charge for electric and plug-in hybrid electric vehicles from 2027, including NSW, Tasmania, South Australia and Western Australia. However the legality of state-based charges is in question after the High Court found Victoria's Zero and Low Emission Vehicles charge unconstitutional in October 2023. The states' timeline for introducing a charge could be appropriate, Australian Electric Vehicle Association national president Chris Jones concedes, as the nation's electric fleet is likely to reach 30 per cent of new car sales by that date. A road-user charge should be based on a vehicle's mass and how many kilometres it travels each year, he says, and should apply to all vehicles regardless of their fuel source. 'The average person drives 12,000km a year so it would work out to cost about $380 to $400 a year.' The government should also leave existing fuel excise charges in place, as they would act as an incentive for motorists to purchase low-emission vehicles. 'It's directly proportionate to how much pollution you cause,' Dr Jones said. 'It's an effective pollution tax and we want to discourage people from buying vehicles that run on petrol.' While a road-user charge is likely to be discussed at the Economic Reform Roundtable from Tuesday, Chalmers said the government will 'take the time to get this right'. In the meantime, Gaur said he hoped the road tax reform debate could be tackled sensibly and suggestions EV drivers do not pay to use roads can be discredited as fees include registration, stamp duty, luxury car and fringe benefits taxes, and taxes on electricity. 'EV drivers do pay tax,' he said. 'That is a really pernicious and completely untrue part of this conversation.'
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Council on the Ageing (COTA) NSW CEO Gohar Yazdabadi told The Senior the Government's changes to aged care mean that retirees will need to tap into more of their "savings, super and assets" so they can age "safely". "We're seeing more instances of 'inheritance protection', where family members stop older people from spending money on care, so there's more left to inherit, which is clearly a form of elder abuse," she said. "The idea that inheritance is a right, rather than a possibility, is shifting the dynamics of ageing." Ms Yazdabadi said the rise in inheritance impatience is making families forget or not care that retirees need their money to live and age well. "Older people are finding themselves in the difficult situation of having to navigate these expectations along with managing their own financial needs." she said. 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With the cost of living soaring and home ownership out of reach for many of the younger generations, some are hell-bent on protecting an inheritance they believe should be theirs. Over a quarter of Australians are not sure if they will have enough money for their retirement, according to Finder and with the average cost of a house now $1.002 million across the nation, many are hoping an inheritance will save them. But there are concerns an entitled attitude can lead to elder abuse and The Senior has already reported on "Inheritance Impatience", when family members pressure a person for early access to their money. And as the cost of health care for pensioners is set to rise on November 1 and an entry deposit into aged care soared up to $750,000 on July 1, some beneficiaries are trying to cut down their parents' costs. Council on the Ageing (COTA) NSW CEO Gohar Yazdabadi told The Senior the Government's changes to aged care mean that retirees will need to tap into more of their "savings, super and assets" so they can age "safely". "We're seeing more instances of 'inheritance protection', where family members stop older people from spending money on care, so there's more left to inherit, which is clearly a form of elder abuse," she said. "The idea that inheritance is a right, rather than a possibility, is shifting the dynamics of ageing." Ms Yazdabadi said the rise in inheritance impatience is making families forget or not care that retirees need their money to live and age well. "Older people are finding themselves in the difficult situation of having to navigate these expectations along with managing their own financial needs." she said. Eastern Community Legal Centre Managing Lawyer in Elder Abuse Paul Were said the chances of elder abuse can increase when choosing someone to make your medical decisions if you are incapacitated - and they are also in the will. "There's a chance that they might go and make bad decisions, potentially cheaper decisions, so they can try and retain their inheritance," he said. "Some of those medical decisions might be things like how to prolong someone's life. "If that person is also a beneficiary in the will ... they actually may benefit from the death of the person they're supposed to be caring for." The Victorian lawyer said it is hard to know if someone you love and trust might make a decision in their favour to speed up their inheritance, and if retirees are unsure who to appoint, they always have the option to not name anyone. The lawyer said the clients he usually sees are retirees who have discovered their adult children have been mishandling their funds. 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Eastern Community Legal Centre Managing Lawyer in Elder Abuse Paul Were said the chances of elder abuse can increase when choosing someone to make your medical decisions if you are incapacitated - and they are also in the will. "There's a chance that they might go and make bad decisions, potentially cheaper decisions, so they can try and retain their inheritance," he said. "Some of those medical decisions might be things like how to prolong someone's life. "If that person is also a beneficiary in the will ... they actually may benefit from the death of the person they're supposed to be caring for." The Victorian lawyer said it is hard to know if someone you love and trust might make a decision in their favour to speed up their inheritance, and if retirees are unsure who to appoint, they always have the option to not name anyone. The lawyer said the clients he usually sees are retirees who have discovered their adult children have been mishandling their funds. "Taking money from their bank accounts," he said. "Perhaps they're forcing them to sign documents against their wishes, or transferring their property into their own name." The lawyer also said adding to the problem is when older Australians are being blamed for the housing crisis and the younger generation "develop a sense of entitlement" because they think they also deserve a house. "There's really strong links between elder abuse and ageism," he said. Mr Were did say that despite the risks, many parents feel a sense of "pride" knowing they will be able to gift an inheritance to their family members, which he thinks is "lovely". "It's just the crossover when there's this expectation of that happening ... which is what often leads adult children to take advantage of their parents when they are deteriorating." With the cost of living soaring and home ownership out of reach for many of the younger generations, some are hell-bent on protecting an inheritance they believe should be theirs. Over a quarter of Australians are not sure if they will have enough money for their retirement, according to Finder and with the average cost of a house now $1.002 million across the nation, many are hoping an inheritance will save them. But there are concerns an entitled attitude can lead to elder abuse and The Senior has already reported on "Inheritance Impatience", when family members pressure a person for early access to their money. And as the cost of health care for pensioners is set to rise on November 1 and an entry deposit into aged care soared up to $750,000 on July 1, some beneficiaries are trying to cut down their parents' costs. Council on the Ageing (COTA) NSW CEO Gohar Yazdabadi told The Senior the Government's changes to aged care mean that retirees will need to tap into more of their "savings, super and assets" so they can age "safely". "We're seeing more instances of 'inheritance protection', where family members stop older people from spending money on care, so there's more left to inherit, which is clearly a form of elder abuse," she said. "The idea that inheritance is a right, rather than a possibility, is shifting the dynamics of ageing." Ms Yazdabadi said the rise in inheritance impatience is making families forget or not care that retirees need their money to live and age well. "Older people are finding themselves in the difficult situation of having to navigate these expectations along with managing their own financial needs." she said. Eastern Community Legal Centre Managing Lawyer in Elder Abuse Paul Were said the chances of elder abuse can increase when choosing someone to make your medical decisions if you are incapacitated - and they are also in the will. "There's a chance that they might go and make bad decisions, potentially cheaper decisions, so they can try and retain their inheritance," he said. "Some of those medical decisions might be things like how to prolong someone's life. "If that person is also a beneficiary in the will ... they actually may benefit from the death of the person they're supposed to be caring for." The Victorian lawyer said it is hard to know if someone you love and trust might make a decision in their favour to speed up their inheritance, and if retirees are unsure who to appoint, they always have the option to not name anyone. The lawyer said the clients he usually sees are retirees who have discovered their adult children have been mishandling their funds. "Taking money from their bank accounts," he said. "Perhaps they're forcing them to sign documents against their wishes, or transferring their property into their own name." The lawyer also said adding to the problem is when older Australians are being blamed for the housing crisis and the younger generation "develop a sense of entitlement" because they think they also deserve a house. "There's really strong links between elder abuse and ageism," he said. Mr Were did say that despite the risks, many parents feel a sense of "pride" knowing they will be able to gift an inheritance to their family members, which he thinks is "lovely". "It's just the crossover when there's this expectation of that happening ... which is what often leads adult children to take advantage of their parents when they are deteriorating."
ABC News
2 hours ago
- ABC News
What is productivity? It's one of the biggest topics at this week's round table
The Albanese government's "economic reform round table" will be held in Canberra this week, from Tuesday to Thursday. "Productivity" is on the agenda for the second day. What is productivity? Why is it important? Why are policymakers worried about it? It's a major topic that impacts everyone. When we hear the word "productivity," our eyes can glaze over, but we're talking about something profound. At its heart, productivity is about doing more with less effort to improve everybody's lives. For example, imagine someone hands you a shovel and asks you to dig a long trench from one end of a football field to the other, to lay some underground cables. How long would it take you to dig the trench? (And what would it do to your hands and back?) Now, instead of a shovel, let's say they give you an excavator. The difference in your "output" and the ease with which you could complete the task would be dramatic. It would see a huge improvement in your productivity, and it would be thanks to the investment in machinery and the improvement in the state of technology you had at your disposal (shovel vs excavator). Modern society has been built on constant productivity improvements. They make it much easier and faster to do things compared to the past. That has a deeply personal impact on everybody's lives — it's about our time, and improvements in our lifestyle and material prosperity. Over time, productivity growth can lead to lower prices for goods and services, higher profits for businesses, higher wages for workers, and stronger economic growth. A few years ago, the Productivity Commission explained things this way: "The number of hours a person needs to work in order to buy particular goods has fallen dramatically," it wrote. "In 1901, it would have required several months of work to afford a new bike, but today it requires less than a day of work for a basic model. "[And] these falling costs understate the increased quality of most goods available now compared to what was available at Federation — even the lowest-quality bicycles produced now are much safer and easier to use than their 1901 versions. "[And] more significant for many people are the goods that are cheaply available now that had not been invented at Federation. "Antibiotics, for example, have lowered the mortality from infectious disease from about 30 per 10,000 people in 1907 to 1 per 10,000 people in 2017, all at a fraction of the price." It published a table with more examples to illustrate its point: This is another area where our eyes can glaze over, so we don't want to get bogged down here. But there are two main ways to measure productivity. As the Reserve Bank explains: The RBA has produced this handy little graphic to help us visualise what they're talking about: Yes. There are quite a few challenges. But it depends on the nature of the "economic activity" you are trying to measure. For example, it's far easier to measure the productivity of a manufacturing facility than a childcare worker. How do you measure a childcare worker's "output" when their job is to care for babies and toddlers? What about teachers? Nurses? Police? In the terminology, "non-market" industries are notoriously difficult to measure when it comes to productivity. The Australian Bureau of Statistics (ABS) doesn't even provide estimates for multi-factor productivity (MFP) for our three non-market sector industries: public administration and safety, education and training, and healthcare and social assistance. The non-market sectors are characterised by providing goods and services that are either free of charge or heavily subsidised, and are not primarily driven by market forces. The ABS only provides MFP estimates for the 16 "market" industries in our economy that produce goods and services that are sold at market prices, because their output is much more easily measured. But even then, when you run your eye down the list of those 16 industries in the table below, you can see how it might be much easier to measure productivity in some market sectors than others. It's why the growth of the "care economy" in Australia is presenting unique problems for policymakers. As more and more workers enter the "non-market" industries of childcare, aged care, and healthcare, the area of the economy where "productivity" is much harder to measure is growing. But when the Productivity Commission recently tried to estimate non-market "labour productivity" for the three non-market sector industries, by using gross-value added and hours worked, its estimate showed a steep decline over recent years. It found that labour productivity for the "whole economy" has barely risen over the past decade, when averaging labour productivity in the market and non-market sectors combined. Why is productivity growth so slow in Australia at the moment? Why has business investment declined? Lots of people are trying to answer those questions, and there are probably many causes. Participants at the productivity round table will discuss them this week. But here's an interesting hypothesis. In early 2023, Ken Henry, a former treasury secretary (2001 to 2011), gave a speech to the Tax Institute titled "The need for ambitious tax reform." In that speech, Dr Henry said part of the answer to our productivity problems comes from the fact that Australian policymakers mishandled the mining boom of the early 2000s, and we're now living with the consequences. He said if we had properly taxed the super profits of the miners in the early 2000s, we could have used that revenue to re-invest in non-mining parts of Australia's economy to lift non-mining productivity, but we didn't. And now that the mining boom is over, we're left with a hollowed-out economy with woeful rates of productivity. Dr Henry said, historically, much of Australia's productivity growth had been driven by "capital-deepening" (that is, higher capital per worker), thanks to a strong rate of business investment. But two centuries of capital-deepening have stalled. He said Australia has unfortunately experienced "capital-shallowing" in the 21st century, with declining physical investment in the non-mining sectors and more and more non-mining capital heading overseas. He said the positive terms-of-trade shock, caused by soaring commodity prices linked to the China boom, had pushed Australia's dollar higher earlier this century. The strong appreciation that followed in our real exchange caused a "profound loss" of international competitiveness for Australia's trade-exposed industries. He said that pressure could have been released with a resources super profits tax or something similar, with the money reinvested in non-mining parts of the economy to boost productivity there, but it didn't happen. Instead, he said Australian governments just "let it rip." "The collapse in the non-mining investment rate is remarkable," he said in his speech two years ago. "The financial mirror image of declining physical investment and capital-shallowing is that, in recent years, we have recorded net capital exports on the balance of payments. "Many commentators appear to believe that we have become a net capital exporter merely because superannuation has boosted household saving. But I would argue that we are exporting capital because Australia has become an increasingly unattractive destination for doing business, in the eyes of foreign investors and Australian savers alike. "It is truly extraordinary that this country, which stood to gain the most, should be suffering capital-shallowing, and should be a net capital exporter, not withstanding a historic mining boom," he said. Also in 2023, the RBA's Jonathan Hambur and the e61 Institute's Dan Andrews released a paper suggesting another reason why productivity growth may have slowed in Australia. "We find evidence that increasing market power [of powerful companies] has played a role, muting incentives for better firms to invest and grow their capital stock," they wrote. "This finding complements earlier work that found declining competition had limited incumbent firms' incentives to reallocate labour to more productive firms and to innovate and adopt technologies. "It reinforces the need to understand why competitive pressures may be declining, and whether that reflects competition policy or other frictions that prevent new firms from growing and challenging incumbents." Last month, the Productivity Commission supported that thesis, warning that Australia's 21st-century economy is dominated by powerful firms that are extracting above-normal profits from the system, and their power is growing. It said those firms are extracting "economic rent" from our economy, which means they're charging higher prices and collecting higher profits from a lack of competition, and it's crippling investment (and undermining productivity growth) elsewhere in our economy. It said that if we wanted to reform our tax system, we should focus on that issue.
