NSW government examines new transport levies as EV market expands

The NSW government has confirmed that it is actively considering the introduction of new taxes and levies that would apply to electric vehicles in the state.

Treasury officials told a budget estimates hearing earlier in March that the government was considering a shift to road user levies, based on the distance driven, as an alternative to levies charged on fuel sales.

The shift may see state governments recover a greater share of transport tariffs as the fuel excises – charged predominantly by the Federal government – decline as people shift to electric vehicles.

In Australia, an excise is currently levied on petrol sales of around 42 cents per litre, in addition to a 10 per cent GST charge, which are both collected by the Federal government.

Deputy secretary of the NSW Treasury, Joann Wilkie, told the budget estimates hearing that the NSW government was actively considering new models for collecting transport tariffs, with a shift to electric vehicles in mind.

“Electric vehicles at the moment are obviously subject to registration duties, like all cars. But apart from that, they do not contribute to taxation collected that is then used for the upkeep of roads and that sort of thing,” Wilkie told the hearing.

The treasury officials told the hearing that the introduction of new charges for electric vehicles may be justified to cover the costs of new charging infrastructure as levies collected from fuel sales fall.

Governments face a challenge in addressing the current State-Federal split in how revenue is collected from petrol tariffs, which is currently collected by the Federal government.

“There are various different revenue models that are being looked at. Do you use a model where you extend registration duties specifically on electric vehicles? Do you use some sort of excise levy that the Commonwealth would need to levy because the States could not necessarily do that?”

The treasury officials pointed to New Zealand and Norway as two examples where governments have sought to introduce reforms to transport revenue measures to prepare for a shift to electric vehicles.

New Zealand recently introduced a new system of road user charges, where vehicles pay levies proportionate to the distance driven in a year.

The new charges would be designed to better reflect a vehicle’s use of roads and other transport infrastructure. However, electric vehicles are currently exempt under New Zealand’s road user charges in an effort to support adoption.

New Zealand will look to apply the per kilometre charge to electric vehicles once adoption passes 2 per cent of the country’s light vehicle fleet.

“New Zealand has a pilot going at the moment where they look at distance charging. There are various different models that a government could consider and bring in, so we are keeping an eye on all of the public policy experiments that are going on around the world and that are being looked at on that front,” Wilkie added.

The treasury officials were questioned by Greens MLC David Shoebridge, who queried whether the NSW government would introduce new tariffs on electric vehicles at a time when adoption was being supported elsewhere.

“Let’s be clear: While other jurisdictions around the world are looking to give tax and registration concessions to encourage the uptake of electric vehicles, the New South Wales Government is looking at new and novel ways to add additional taxes to electric vehicles,” Shoebridge said.

The Treasury officials rejected that claim.

“At the moment, electric vehicles in Australia are subject to less taxation than fuel vehicles and therefore do not contribute as taxpayers to road upkeep, and there is significant infrastructure that needs to be built to support their use generally in the population,” Wilkie said in response.

In a letter seen by The Driven, the Electric Vehicle Council has written to the NSW Treasurer, seeking clarification of the government’s plans and hoped that any such changes would be introduced at a point in the future, to provide time for the early adoption of electric vehicles to be supported.

“It should be clear that imposing a new tax on EVs will disincentivise uptake. Any scheme should be designed with complementary measures to ensure incentives outweigh disincentives,” Electric Vehicle Council CEO Behyad Jafari wrote.

“Timing is critical. Overseas governments have taken significant steps, to support the uptake of EVs and are now considering future options for road user charges. Australia cannot skip the support and move straight to increased taxes.”

“The Electric Vehicle Council would recommend a timeline that prioritises support for increased EV uptake, with plans for new charges to occur after 2025 or 2030 depending on interim success,” Jafari added.

The Electric Vehicle Council warned that NSW risked becoming the first jurisdiction to disincentivise electric vehicle adoption.

“Australia is already conspicuous in its absence of meaningful regulations, incentives and mandates supporting the transition to electric vehicles,” the council said.

“NSW would become the world’s first market to not only not provide a financial incentive for EV uptake, but implement a tax discouraging it.”

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