Will there be an electric vehicle tax?

Fast read

Australia does not impose any taxes or congestion fees on electric cars (EVs).

Nevertheless, some jurisdictions have suggested implementing similar fees in the future.

In New South Wales, Victoria, South Australia, and Western Australia, for instance, a tax of 2.5 cents per kilometre for purely battery-powered EVs and 2 cents per kilometre for plug-in hybrid EVs is scheduled to be put into effect by July 2027. This would increase the running costs of an EV by $2.50 for every 100 kilometres driven, but they would still be less expensive than gasoline-powered vehicles.

The Australian Capital Territory is also considering introducing a congestion-based tax in the medium term.

Queensland, the Northern Territory, and Tasmania have no existing or planned EV taxes as of late 2022.

Will electric vehicles attract a tax in the future?

Congestion charges are currently not implemented in Australia. However, they or similar taxes have been considered in some Australian States, especially regarding Electric vehicles.

So what exactly is electric vehicle congestion tax?

One of the most prominent locations for congestion charges is in London. In London, the congestion charge is a £15 charge, around AUD $25 and has been around since 2003.

The charge will apply if you drive within the London areas defined as congestion zones (Mainly Central London) between 7 am and 6 pm Monday to Friday and midday to 6 pm on Saturdays and Sundays.

This charge can be paid online, automatically, or out of your account, much like the tolls on an Australian tollway like the M4 in Sydney or City Link in Melbourne.

It was introduced to reduce pollution and peak-hour traffic within London. The plan is that drivers, who can be flexible about the time when they drive into the congestion zone, can avoid the charge. But, one might argue that the rich can access the congestion zone anytime, and the poorer people can not afford it and stay away.

electric vehicle pixel drawing
Electric vehicles can save you money by avoiding pollution-related taxes

There is an exemption for drivers with a disability sticker and motorcycles or bicycles. Also, one of the benefits of driving an electric vehicle in the UK is the exemption from many petrol-related taxes. This includes an exemption from the congestion tax due to the Cleaner Vehicle Discount.

In saying this, the Cleaner Vehicle Discount is planned to end by late 2025, meaning electric vehicles would no longer be exempt from the congestion tax.

Even though this is true, overall, purchasing an electric vehicle can still future-proof owners from other taxes. Such as Clean Air Zone Taxes, which are becoming popular around Europe and might come to Australia one day.

What about Australia today?

A similar model to the London example would be expected in different Australian states if congestion charges were introduced. Some tax will most likely apply to electric vehicles in the future because EVs are currently getting a “tax-free ride”.

While petrol cars attract a 44-cent levy on fuel, and these funds are supposed to be used for road upkeep, the electricity used for electric vehicles is not taxed. Therefore EVs currently do not contribute to the road work fund. This can be seen as blatantly unfair.

There is talk about introducing a distance tax for electric vehicles, whereby they would pay a small amount for every km travelled. However, the government must install toll sensors on all roads for such a system to work automatically. This could become very expensive.

As a workaround, it has been proposed that electric vehicle owners should complete a log book daily to show how many km they travelled. However, knowing the Australian psyche, I am unsure how accurate these logbooks will be.

electric vehicle charging
Depending on your state, small electric vehicle taxes can apply per kilometre travelled

The current state of electric vehicle taxes per state is listed below:

NSW, SA & WA

No electric vehicle tax exists; however, by July 2027, 2.5c per km for full battery-powered EVs and 2c/km for Plug-in hybrid EVs will be introduced. This would add $2.50 to the running cost of an EV for every 100km driven,  but would still make them quite a bit cheaper than petrol-powered car running costs. 

Victoria

This State is the least EV-friendly State in Australia and has introduced a road-user charge – known previously as the Zero and Low Emission Vehicle road-user fee (ZLEV). It requires the owners of electric vehicles to keep a record of the KM driven for each year. It then taxes the distance by a factor of l2.8 cents per km.

This amount increases regularly to take account of inflation. Plug-in hybrids are slugged as well by 2.3 cents per km.

ACT

There is currently no tax on electric vehicles. However, a congestion-based tax may be introduced in the medium term.

QLD, NT, TAS, 

No existing or planned taxes as of late 2022.

In summary

Currently, no extra congestion or distance tax applies to electric vehicles within Australia. However, as you can see above, electric vehicles become more popular and the majority of the transport fleet in a decade or so. They will most likely be treated the same as fuel-based vehicles and be taxed one way or another. Enjoy your tax-free time – while it lasts. 

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