Should there be an electric vehicle tax like the fuel excise?

author-avatar By on March 11, 2021
Should there be an electric vehicle tax like the fuel excise?

Electric car sales around the world are climbing, but a potential electric car tax is causing much debate here in Australia.

According to data by Statista and released by the World Economic Forum, electric car sales almost doubled globally in 2020, and now account for more than 4% of all passenger vehicles worldwide. 

Norway, Iceland and Sweden lead the way, with the former having a near 75% electric car market share and the latter having 32.2%. 

Germany meanwhile grew its electric vehicle (EV) fleet by more than 260%, as did France by 202%. 

In the market for an electric car? The table below features car loans with some of the lowest fixed interest rates for low-emissions vehicles on the market.

Advertised rate Comparison rate Monthly repayment Interest TypeVehicle TypeMaximum Vehicle AgeOngoing FeeApplication FeeTotal RepaymentEarly RepaymentInstant ApprovalOnline Application
FixedNew1 yearMore details

Green Car Loan

FixedNew2 yearsMore details

New Vehicle Fast Loan Low Rate

  • Quick application process and no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars up to 3 years old

New Vehicle Fast Loan Low Rate

  • Quick application process and no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars up to 3 years old
FixedNew1 yearMore details
No ongoing fees

Plenti Car Loan

No ongoing fees

Plenti Car Loan

    FixedNew, Used5 yearsMore details

    Fixed Car Loan (with Low Emission Vehicle discount)

    Base criteria: fixed and secured car loans for 'low emission' cars. Data accurate as at 01 September 2020. Rates based on a loan of $30,000 for a five-year loan term. Products sorted by advertised rate. Repayments are calculated based on advertised rates. Rates correct as of October 19, 2021. View disclaimer.

    Australia however continues to lag behind other countries, thanks in large part to its lack of EV infrastructure and government assistance to buy them

    The latest car sales data shows there were about 6,900 EVs sold in Australia in 2020, a 2.7% increase from 2019, with EVs accounting for 0.7% of total Australian car sales.

    The United States by comparison now has 2.3% electric cars, and grew its fleet by 4%. 

    One of the key criticisms among EV advocates in Australia is not just the lack of government incentives, but what can often be described as governments making it harder to buy and use them. 

    As an example, the Victorian Government is introducing an electric vehicle road tax from July 2021, a tax of 2.5 cents a kilometre for full electric vehicles and 2 cents a kilometre for plug in hybrid vehicles.

    Costing around $500 for an electric car that travels 20,000kms a year, Electric Vehicle Council (EVC) chief Behyad Jafari recently said Australia is a "uniquely hostile" market to electric vehicle (EV) uptake.

    "Victoria is now doing what no other jurisdiction on earth does by discouraging people from buying electric vehicles by slugging them with a special tax," he said.

    "When this policy idea gets pushed by the oil lobby around the world, they typically get laughed out of the room. Tim Pallas [Victorian Treasurer] cut them a key to his office.

    "The federal government’s inaction is bad, but even they’re not destructive enough to actively discourage electric vehicle uptake with a new tax."

    South Australia also has a road user charge for electric vehicles. 

    However, some say such taxes are necessary as the revenue from fuel steadily falls. 

    See also: Luxury car tax threshold gets bumped for 2020-21

    Auto association calls for national vehicle tax, which includes electric cars

    The fuel excise, currently 42.3¢ in tax on every litre of petrol and diesel sold at petrol stations, is said to be worth almost $50 billion to the Federal Budget over the next four years. 

    This tax is designed to help pay for things like road maintenance and infrastructure, and while it can help add to the cost of petrol for road users, the (slowly) falling numbers of petrol and diesel cars has raised the alarm for motoring bodies. 

    With a hodge-podge patchwork of different state and territory rules for fuel and electric vehicle taxes currently in place, The Australian Automotive Association (AAA) has called for “urgent national leadership and coordination” to deliver a nationally consistent road user charge.

    In a submission for the May Budget, the AAA labelled the fuel excise as “an inequitable tax”, and instead argued for a distance-based road user charge. 

    This would, according to AAA, "avoid creating inconsistent tax systems that disincentivised the renewal of Australia’s passenger fleet while maximising the benefits of technological advances in motoring."

    “The federal government has a leadership role in the reform of motoring taxation and the effective and sustainable transition to new vehicle technologies,” it says.

    RACV senior engineer Nicholas Platt however agreed with the EV levy of 2.5 cents, saying it would be unlikely to discourage the uptake of zero-emissions vehicles.

    “RACV has long advocated for a fairer, more efficient and transparent user-pays system to replace the current network of state and federal taxes”, he said. 

    “As the number of zero-emissions cars on our roads continues to grow, the EV tax will make up for lost fuel excise, so authorities can continue to fund and maintain Victoria’s roads."

    Adrian Dwyer, chief executive of think tank the Infrastructure Partnerships Australia (IPA), said such a tax would eventually be necessary. 

    "Right now we raise about $11 billion per year through fuel excise, and that's in terminal decline with the greater fuel efficiency of vehicles," he said.

    "As those dollars go, the money's going to need to come from somewhere to pay for roads."

    Each of these groups however have called for more government investment to encourage EV uptake, such as the ACT government's free registration and interest-free loan scheme

    There are currently no cash incentives for buying electric vehicles offered by the federal government. 

    Other states rule out electric vehicle tax 

    The New Daily asked every state and territory government whether they had any intention of introducing a similar scheme to Victoria's EV road tax. 

    Western Australia, Tasmania and the Australian Capital Territory have either categorically ruled out or downplayed such a scheme. 

    Tasmania's government said it was “definitely not on our radar”, and Western Australia said it “does not propose the introduction of any road user charge for electric vehicles”.

    Queensland and New South Wales said they were open to the idea and were currently looking into its feasibility, respectively.  

    Photo by CHUTTERSNAP on Unsplash   


    The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

    • The big four banks are: ANZ, CBA, NAB and Westpac
    • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
    • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
    • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and

    Some providers' products may not be available in all states.

    In the interests of full disclosure,, Performance Drive and are part of the Firstmac Group. To read about how manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

    *The Comparison rate is based on a $30,000 loan over 5 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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    William Jolly joined as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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