Owners of full battery electric cars could be hit with road user charges twice as high as hybrid owners if the design favoured by various states was adopted at a national level, a new report has found.
The report by the McKell Institute says the flat 3c a kilometre charge for EVs proposed by the NSW government, and previously the Victoria government before its program was ditched after a legal battle, threatens to throttle the uptake of electric cars because it is unfair.
It points to the case of a Toyota Yaris Hybrid, which has a fuel efficiency of around 3.3 litres per 100 kilometres. With the fuel excise currently charged at 51.6 cents per litre of fuel, the Yaris Hybrid is charged around 1.7 cents per kilometre.
The NSW government’s proposed road user charge would be 3 cents per kilometre, which would be nearly double the amount paid by the more polluting hybrids.
“In an environment where the government is seeking to reduce emissions and reliance on fossil fuels, this acts as a perverse incentive to uptake,” the institute says.
In its place, McKell proposes a “progressive” road user charge that is income linked so people on lower income pay less, and it would not come into force until EVs made up 30 per cent of the fleet. The idea is backed by Electric Vehicle Council.
“Currently, the fuel excise system is regressive and heavily punishes low-income earners who typically cannot afford highly fuel-efficient vehicles and who are typically required to live further from metropolitan centres, in areas poorly serviced by public transport,” write the authors of the report.
“We believe a future-facing road user charge system should address this inequality.”
Its important because it found that EV registrations in western Sydney have increased by 119 per cent per year since 2021, outpacing the rate seen in Greater Sydney of 95 per cent. Similarly, in Melbourne’s west, EV ownership is up 125 per cent per year compared with 98 per cent city-wide.
Given that the western suburbs of Sydney and Melbourne are typically home to middle-income earners, but also limited public transport options and longer commutes, choosing to go electric is a critical cost-of-living decision and is saving up to $3,000 per year in fuel and maintenance costs.
McKell’s proposed universal and progressive RUC would see charge rates vary by income bracket and be delivered through the tax return system, with lower-income earners receiving a rebate and concession card holders automatically on the lower rate.
The McKell model also proposes exempting EVs from any charge until EVs reach 30 per cent of the national fleet, and for rates to be phased in progressively. Conversely, when EVs reach 75 per cent of the national fleet, the report proposes making the scheme universal and winding back the fuel excise.
The report models four income bands, showing that the lowest earners would pay 3.74 cents per kilometre, which adds up to an annual bill of around $444, while those on highest incomes would pay 12.88 cents per kilometre, or $1,531 per year.
“Families in outer suburbs have looked at their petrol bill and made a rational decision,” said Edward Cavanough, CEO of the McKell Institute.
“They drive the furthest and have the fewest alternatives to driving. A per-kilometre charge would penalise them for that, and that’s not a fair outcome.
“At a time when the government is trying to accelerate the uptake of electric vehicles, a per kilometre model is a basic incentive to stick to fossil fuels.”
See The Driven’s detailed EV sales data here: Australian electric vehicle sales by month in 2026; by model and by brand.
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Joshua S. Hill is a Melbourne-based journalist who has been writing about climate change, clean technology, and electric vehicles for over 15 years. He has been reporting on electric vehicles and clean technologies for Renew Economy and The Driven since 2012. His preferred mode of transport is his feet.