EV 'road user' charge back on agenda amid fuel excise criticism

The Australian Government is weighing up a national road user charge for electric vehicles or EVs, with Treasury examining distance-based options. Meanwhile, criticism surrounding the long-term sustainability of fuel excise – or fuel tax – is growing ahead of the May 2026 federal budget.

Momentum behind a national road user charge for electric vehicles has increased as petrol prices rise and the federal government faces renewed questions about how Australia will fund its road network in the years ahead.

According to reporting by news.com.au, Treasurer Jim Chalmers has put the issue firmly back on the agenda.

He acknowledged that the current system – where petrol and diesel drivers pay fuel excise (read: fuel tax) at the bowser while EV drivers do not – will not be sustainable moving forward, particularly as more Australians transition to electric vehicles.

In 2025, 8.3 per cent of new vehicles sold were EVs, but that number is expected to rise in 2026 as cheaper EVs hit the market and fuel prices continue to rise.

Sky News has also reported Treasury staff are modelling the charge as part of a broader tax reform package, with government sources describing the proposal as ‘no secret’ ahead of the May budget.

Fuel excise is currently charged as a flat, per-litre tax collected by the federal government whenever petrol or diesel is purchased.

Since it is not charged as a percentage of fuel prices, excise revenue does not increase when prices spike, a limitation that has come under renewed scrutiny during the recent global fuel supply disruptions.

Electric vehicles, by contrast, pay no fuel excise.

That gap has fuelled political and public debate, particularly as EV sales grow and governments warn of a widening shortfall in funding for roads and highways.

Options being examined include charging EV drivers based on distance travelled, either tracked through in-car GPS systems or via annual odometer readings.

Over time, such a system could expand beyond EVs and potentially replace fuel excise altogether, applying to all vehicles regardless of drivetrain.

Industry groups argue the issue is more complex than EVs simply not paying their way.

The Australian Electric Vehicle Association (AEVA) says EV owners already contribute through registration, stamp duty, tolls, GST and licence fees, and that fuel excise itself is not directly earmarked for road spending.

However, the association also supports the eventual introduction of a universal road user charge based on vehicle mass and distance travelled, arguing this would better reflect road wear and avoid discouraging EV adoption too early in the transition.

The debate has also been shaped by the collapse of state-based EV charges.

Victoria’s distance-based EV levy was struck down by the High Court in 2023, forcing refunds and effectively ruling out state-led schemes.

Since then, focus has shifted to a nationally coordinated approach, with New South Wales the only state still planning a future charge from 2027.

For drivers, cost remains the biggest unknown.

Based on previously floated state proposals referenced by news.com.au, a distance-based charge could cost some motorists between $300 and $400 per year depending on how far they drive, though no national rate or structure has been officially confirmed at this stage.

While the government has stressed there is no rush to introduce a new road user charge, criticism of the fuel excise model is unlikely to fade as EV uptake accelerates and conventional vehicles become more fuel efficient.

Key questions remain unresolved, including whether any charge would initially apply only to EVs, how distance would be measured, and how privacy concerns around vehicle tracking would be addressed.

For new car buyers, the issue of a road user tax adds another consideration around the total cost of ownership, which already includes charging costs, servicing, insurance and resale value.

As Australia moves closer to a future less reliant on fuel excise, how governments balance fairness, revenue and incentives will play a growing role in what it really costs to drive, regardless of what powers the car.

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