Kilometre Tax Plan Revealed as Revenue Replacement Takes Focus
The New South Wales government plans to impose a kilometre-based tax on electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) starting July 31, 2027, forecasting $440 million in revenue during the first three years of implementation. NSW Treasurer Daniel Mookhey confirmed at a recent parliamentary inquiry that EV owners will be charged more than 3 Australian cents per kilometre, while PHEV owners will pay 2.4 cents per kilometre. The measure aims to offset the declining revenue from fuel excise as electric vehicle adoption grows.
Mookhey emphasized that the NSW government prefers a federally administered national kilometre-based tax scheme. However, if the Commonwealth does not act in time, NSW will proceed with legislation passed by the previous parliament. He stated that NSW has obtained legal advice to avoid repeating Victoria’s 2023 experience, when its kilometre tax was ruled unconstitutional by the High Court of Australia, though he declined to disclose the specifics of the legal guidance.
High Court Ruling Poses Legal Hurdle, State Seeks Federal Authorization
In 2023, the High Court of Australia ruled that Victoria’s 2021 kilometre-based tax on electric vehicles was unconstitutional, as state governments lack the authority to impose such taxes without federal authorization. Mookhey noted that NSW is seeking the Commonwealth to “refer its powers” to avoid legal challenges. However, as of now, the federal government has not formally responded to NSW’s request.
The NSW government has tasked Service NSW with establishing a working group to determine the most convenient method for motorists to pay the kilometre tax, though no specific plan has been announced. Mookhey stated that if the federal government does not introduce a national scheme by July 2027, NSW will proceed with its own law and is prepared to face potential legal challenges.
Electric Vehicle Market Surges, Industry Calls for Delayed Taxation
Australia’s electric vehicle market has shown robust growth recently. In June of this year, EVs accounted for 23% of all new vehicle sales, setting a record high. Additionally, sales of plug-in hybrid vehicles have more than doubled over the past year. Despite this growth, the automotive industry remains cautious about NSW’s kilometre tax plan. The NRMA and the Electric Vehicle Council testified at the inquiry that while they support the concept of a kilometre-based tax, they argue it should only be implemented once EVs represent 30% of Australia’s total vehicle fleet to avoid stifling market development.
The Western Australia government has also proposed a kilometre-based tax on electric vehicles starting July 2027, reflecting growing concerns among state governments about declining fuel excise revenue. The NSW government estimates that as electric vehicle adoption increases, fuel excise revenue will continue to decline, making the kilometre tax a necessary replacement. However, there is currently no clear research indicating whether the tax will impact consumer willingness to purchase electric vehicles.
Mookhey stressed that the kilometre tax is designed to fairly distribute road usage costs, preventing EV owners from gaining an unfair advantage by not paying fuel excise. He stated that the NSW government will continue to negotiate with the Commonwealth but will proceed with the tax if no national consensus is reached, ensuring stable fiscal revenue.
