The Victorian Government faces fresh criticism from the automotive industry following the introduction of a new road tax.

Victorian owners of electric cars and other zero-emissions vehicles will be required to pay a road-user tax of 2.5 cents per kilometre driven from 1 July 2021 – and the precedent could trigger other states to follow.

The charge amounts to $375 a year based on the national average distance travelled of 15,000km, or just $125 a year for vehicles that travel 5000km a year.

The Victorian Government argued the road user charge needed to be introduced because zero emissions vehicles avoid fuel excise, a large portion of which goes towards roads.

The new laws, passed this week by the Victorian Legislative Assembly, also require plug-in hybrid owners to pay 2 cents for every kilometre driven ($300 for every 15,000km).

Because plug-in hybrid cars are powered by petrol and electricity, such vehicles will pay fuel excise as well as a distance-based fee.

Conventional hybrid and mild-hybrid vehicles – which cannot be charged via an external power source – are exempt from the charge.

Owners will have to submit odometer readings to state authorities annually, and will be at risk of having their vehicle registration suspended for non-compliance.

The new road-user tax has been introduced to help offset the loss of 42.7 cents taxed for every litre of petrol and diesel sold at the bowser – of which, up to half goes back into national transport infrastructure.

But while the fuel tax goes to the Federal Government, the road-user tax for zero- and low-emissions vehicles goes directly to the Victorian Government.

“Not only is Victoria’s tax on [electric vehicles] (EVs) parochial and premature, owners of plug-in hybrid EVs stand to be taxed double under its ill-considered provisions – for the road-user charge (RUC) and the fuel excise. Yet we understand that old-tech, so-called ‘self-charging hybrids’ escape the road user charge,” a spokesperson for Volkswagen Australia told CarAdvice.

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“The government is seemingly unable to explain why it is gouging owners of the latest hybrids while exempting from the RUC vehicles running 1990s technology. Not for nothing has Victoria’s bizarre gambit been called the ‘worst electric vehicle policy in the world’.”

In late April 2021, 25 organisations including Volkswagen, Hyundai, and Uber signed an open letter to the State Government condemning the new tax, taking out a full-page ad in The Age newspaper to label it as the “worst electric vehicle policy in the world”.

The open letter also stated: “No other jurisdiction has introduced such a targeted levy on the cleanest vehicles on the road without significant incentives to balance it out.”

“Victoria is already massively behind comparable jurisdictions in the US, the UK, and across Europe in terms of electric car uptake,” Behyad Jafari, CEO of the Electric Vehicle Council, said at the time.

“Far from being on track to achieving net zero emissions by 2050, emissions from transport are rising in Victoria. This is the wrong time to tax zero emissions vehicles,” Mr Jafari said.

In early May 2021, the State Government announced a subsidy of $3000 for 4000 buyers of electric and hydrogen cars in Victoria, for models costing less than $68,740 before on-road costs.

The $100 million package will fund a further two rounds, with up to 20,000 zero-emissions purchases to receive the subsidy over the next three years.

Despite the road-user tax of 2c/km being imposed on plug-in hybrid models, the subsidy does not extend to those vehicles.

While the Victorian Government announced the package, the NSW Government proposed other financial incentives to help spur sales of zero-emissions vehicles. At the same time, NSW Transport Minister Andrew Constance dismissed the idea of introducing a similar road-user tax on electrified vehicles.

Mr Constance told The Sydney Morning Herald the government should not consider such a tax until zero-emissions vehicles made up at least 40 per cent of the new-car market.

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“What we will do is make ourselves the laughing stock of the world,” Mr Constance remarked at the time, referring to the road-user tax.

“We can’t just go down this path of ‘oh we’re going to lose fuel excise, let’s put in a road-user charge,’ no, we urgently need scale and therefore we need to have the market change and that comes back to basic economics really,” he said.

In late 2020, research by Dr Jake Whitehead, E-Mobility Fellow at the University of Queensland, found road-user taxes targeting zero- and low-emissions vehicles disincentivise new-car buyers.

“What matters is perception, and even if the tax is only a few hundred dollars per year, the perception is that it will cost thousands over a car’s lifetime and that government does not support the technology,” Dr Whitehead told SMH at the time.

Speaking to CarAdvice today, Dr Whitehead said the recently-announced subsidy from the Victorian Government won’t be enough to offset the new tax: “We should be aiming for national reform of the road taxation system, and if we were smart about it, as I’ve shown in my research, we could do this in a way that actually encourages the uptake of EVs while achieving sustainable road funding in the long term.”

“The Victorian Government will need to go a lot further in having a comprehensive suite of initiatives as part of an EV strategy if they are serious about reaching 50 per cent EV sales by 2030, which is the bare minimum required in order to reach net zero emissions by 2050,” he said.

The 2020 research was backed by a survey conducted by the Electric Vehicle Council in early 2021, which found only 72.1 per cent of Victorians thought the tax would lead to a decline in sales.

“Victorian voters aren’t stupid. They are seeing what is happening in the rest of the world where the use of electric vehicles is surging due to governments who are actively supporting their roll out,” CEO of the Electric Vehicle Council, Behyad Jafari, said when the polling was released.

While South Australia was the first Australian state to propose the road-user tax, in March 2021 its government announced it would delay its introduction. South Australia Treasurer Rob Lucas told media the extension would allow the government to monitor similar proposals in Victoria.

In early May 2021, Queensland Transport Minister Mark Bailey told 9News the government was open to similar road-user charges in the future, but said “Queensland is certainly not looking at such a move at this year’s budget; we see these moves as very much premature”.

Government representatives from Western Australia, Tasmania, and the Australian Capital Territory have previously indicated they are not considering the introduction of road-user taxes at this stage.

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