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Retired schoolteacher David Farrands is on a driving holiday in Tasmania, but every kilometre he travels he's paying a unique tax that only exists in his home state of Victoria.
Key points:
- Drivers of low or no-emission vehicles are taxed differently across Australia
- Victoria imposes a per-kilometre charge that is currently being challenged at the High Court
- Experts say widespread reform of road taxes is needed regardless of the outcome
Mr Farrands said he thought he was doing the right thing when he purchased his new plug-in electric hybrid (PHEV) car two years ago.
"It's got a battery that runs for 35 kilometres, which is for keeping the air quality in busy cities clean," he said.
"The philosophy and the concept of the vehicle is perfect for people who go into the city occasionally and don't want to pollute … but then travel as a retiree and need an internal combustion engine."
Mr Farrands said did not know that the Victorian state government was about to bring in a new road-user charge that applies to Victorians who drive electric, plug-in hybrid or hydrogen vehicles when he bought the PHEV Mitsubishi Outlander.
"It was so frustrating. We felt like selling it," he said.
For Mr Farrands, the tax is about 2 cents for every kilometre he travels.
It does not matter if his car is running on petrol or driving interstate.
For the last year, Mr Farrands's Zero and Low Emission Vehicle (ZLEV) road-user charge came to about $456. He proved the distance he travelled by uploading a photo of his dash to a government website, as all ZLEV users are asked to do.
In the last 12 months, Mr Farrands has spent much of his time travelling – mostly interstate, on longer drives and towing his caravan, meaning his car is running on petrol.
That means on top of the ZLEV charge, Mr Farrands is also contributing tax dollars to the federal government's fuel excise when he tops up at the bowser.
The fuel excise is charged as 47.7 cents per litre of petrol or diesel, a tax intended to raise revenue to improve Australia's road network.
That does not factor in the cost of electricity for powering the vehicle.
"That is just a huge cost… we are paying more than anybody in a polluting car. I just don't get it," he said.
Victoria's ZLEV tax faces High Court challenge
Victoria is currently the only state actively imposing a road-use charge on electric vehicles (EVs), though some states plan to introduce them in the future.
New South Wales will introduce a similar charge when EVs make up 30 per cent of new vehicle sales or in 2027, whichever comes first, while Western Australia also plans to introduce a charge in 2027.
South Australia was one of the first jurisdictions to propose and legislate an EV charge, but it was scrapped by the new SA government earlier this month before it could take effect.
Victoria's existing tax is also subject to an ongoing High Court challenge, which has become a broader constitutional fight about the types of taxes states can levy.
South Australia director of the Australia Institute, Noah Schultz-Byard, said the "messy patchwork of reforms" from state to state was difficult to understand and created a disincentive for those considering switching to an EV.
"They make people think twice …when we should be doing all we can to encourage more Australians behind the wheel of an environmentally friendly car sooner rather than later," he said.
Infrastructure Partnerships Australia is an industry think tank which supports the introduction of distance-based road-user charges not just for EV users, but eventually, for everyone. Its chief executive Adrian Dwyer does not believe Victoria's charge has scared off prospective EV owners.
Instead, he said the take up in Victoria had been quicker than states with no charges, like Queensland.
He said new road taxes were needed, with the federal government's fuel excise in "slow and terminal decline" due to more efficient cars and eventually, electric ones.
"If you don't solve that problem, at some stage, you end up with a system where there's no cost for the use of a road," he said.
New opportunities for fairer road taxes
Marion Terrill is the head of transport and cities at the Grattan Institute.
She said whatever the High Court decided in this case, it was clear new road taxes would be needed to manage the future of electric cars.
"Even though EVs don't cause carbon emissions, they still cause accidents, as well as congestion, and still contribute to the kind of hogging of public space associated with cars," she said.
She said the smartest and fairest forms of road taxes could take these things into account.
"It makes no sense to charge the same rate to be driving down a quiet country road as it does to be paying on a rainy Monday morning in peak hour in the city," she said.
The Grattan Institute has previously advocated for congestion pricing, which is used in cities like London and Stockholm, to help resolve gridlock in Australian cities.
But she said innovative road taxes could also account for carbon emissions, reflect actual damage being done to roads (vehicle weight or number of axles), as well as where and when the car was being driven.
Director of policy at the Electric Vehicle Council, Jake Whitehead, said flat-distance charges like Victoria's ZLEV charge were unfair to those from regional areas, who had no choice but to drive longer distances.
"Simply slapping an extra cost on EVs is a very short sighted and pretty dumb way to improve the efficiency of our transport system more broadly," he said.
"It's certainly not targeting the great costs that are significant in our transport system, which are principally related to people driving in peak hour traffic in our CBDs with high polluting vehicles."
Earlier this month, the ACT announced its registration pricing would be based on vehicle emissions from July 2023, rather than weight, to incentivise electric and less-polluting cars.
Dr Whitehead said it was time to move away from a "piecemeal ad hoc" approach to road taxation to find a fair approach, requiring collaboration between governments.
"We can no longer continue in the same fashion, in terms of raising road tax," Dr Whitehead said.
"This is not a trivial piece of reform."