The federal government is working on a road tax for electric vehicles, which will reportedly be presented alongside the federal budget in May as part of a broader tax reform package.
The Australian A department of the Treasury has reportedly been working on implementing such a fee, which could be enforced by states and territories. Road usage could be recorded either via GPS in the car or via annual mileage.
As reported last year, Treasurer Jim Chalmers confirmed that the government was “accelerating” work on a national road tax for electric vehicles.
With a planned introduction around 2028, the electric vehicle road tax has been proposed to offset the loss of fuel tax revenue associated with the increasing adoption of electric vehicles.
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Fuel excise tax is a flat sales tax levied by the Australian Government on petrol and diesel purchased from Bowser.
It is adjusted twice a year in line with the Consumer Price Index (CPI) and increased from 51.6 cents to 52.6 cents per liter on February 2, 2026.
The excise tax is expected to generate around $7.3 billion for the federal government for gasoline-powered vehicles, with the diesel excise tax contributing $17.6 billion. However, while revenue from the fuel excise tax was previously earmarked for road funding, it now flows directly into the federal government’s consolidated revenue.
Despite the recent rise in petrol and diesel prices, excise duty remains a fixed fee per liter.
Mr Chalmers has ruled out a cut in fuel excise duty to ease pressure at the pump while work continues on a road tax for electric vehicles.
The Australian As previously reported, the Treasurer was due to attend a forum on the issue hosted by Infrastructure Partnerships Australia (IPA) in Sydney last August.
IPA chief executive Adrian Dwyer has proposed a distance-based charging model for electric vehicle owners nationwide following a 2023 Australian Supreme Court ruling abolishing federal road pricing.
In a statement last September, Mr Chalmers said: “The reforms to the treatment of electric vehicles will ensure fairer treatment of all vehicle types and provide certainty for investment support.”
“The design of reforms should be as simple as possible and minimize administrative and compliance burdens.
“We will ensure any changes are gradual to enable the productivity, climate and consumer benefits of increasing electric vehicle adoption in the coming years.”
The potential introduction of a road tax alongside the existing fuel tax has drawn criticism, with some pointing to New Zealand’s more comprehensive approach.
In August 2025, the New Zealand government announced plans to eliminate the fuel tax and instead impose a road user charge (RUC) on all vehicle types by 2027, based on distance traveled and vehicle weight.
Diesel, electric and plug-in hybrid vehicles that have been subject to the RUC since 2024 will be joined by petrol-powered vehicles.
Several Australian states have also considered introducing road pricing for electric vehicles, with Victoria set to become the first country to introduce such a system in 2021.
However, Australia’s Supreme Court declared the scheme unconstitutional in 2023, forcing the state to abandon the policy and return revenue collected under the scheme.
The Victorian system charged drivers of electric vehicles and plug-in hybrids 2.8 cents per kilometer driven.
The New South Wales government had also planned to introduce a similar fee from 2027 or when electric vehicle market share reaches 30 per cent, but the Supreme Court ruling has shifted the focus to a national approach.
Similar proposals in South Australia and Western Australia have also been put on hold pending federal direction.
The Australian Electric Vehicle Association (AEVA) has called for the introduction of a future road tax for all vehicle types and advocates for a weight-based system.
“A universal road tax based on distance should ultimately replace the fuel tax as a user-payable component of roads and their maintenance,” said Dr. Chris Jones, national president of AEVA, said in a statement.
“The introduction of the NVES (National Vehicle Efficiency Standard) and forecasts that more than 30 percent of new car sales will be electric vehicles by 2030 make it critical for the government to establish an effective and fair national road pricing system.”
A record 103,270 electric vehicles were sold in Australia in 2025, led by the Tesla Model Y, BYD Sealion 7 and Tesla Model 3, with electric vehicles accounting for 8.3 percent of total vehicle sales.
MORE:The Australian government will not cut fuel taxes despite rising prices
