Unpacking Australia’s proposed electric vehicle road user charge Artwork

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Unpacking Australia’s proposed electric vehicle road user charge

October 30, 2025 • RSM Australia

As revenue from the fuel excise continues to drop, Australia’s proposed solution is to make up the difference with a new tax for electric vehicle drivers. In this episode of talkBIG, host Andrew Sykes is joined by RSM Australia’s National Head of Tax Sam Mohammad and RSM Australia’s Sustainability Lead Nicole Mohan to explore the impacts of this controversial policy.

Together, they debate the fairness of a road user charge that only applies to electric vehicles, how this might impact Australia’s sustainability goals and whether there are other ways to transition away from a fuel excise.

What you’ll learn in this episode:

The rationale behind Australia's proposed road user charge for electric vehicles and its potential to replace declining fuel excise revenue.
The fairness and equity considerations of the road user charge, including its impact on different income groups and regions.
How the road user charge aligns with Australia's 2035 emissions reduction target and the importance of its careful design.
The challenges of implementing a road user charge, including vehicle usage tracking and privacy concerns.

Tune in to understand how this policy could impact both individual and corporate road users and how it might shape the future of transportation in Australia.

Experts in this episode:
Sam Mohammad, National Head of Tax, RSM Australia
Nicole Mohan, National Sustainability Lead, RSM Australia
Andrew Sykes, Canberra Managing Partner, RSM Australia

Text us your questions!

Thanks for listening! Visit the RSM Australia website to ask the hosts a question.

0:04

Is a road user charge fairer than a fuel tax?And could this inadvertently discourage sustainable practices by individuals and businesses?Back in August, Federal Treasurer Jim Chalmers held an Economic Forum roundtable whereamong other things, they discussed a new road tax to raise revenue from those not payingfuel excise, EVs or electric vehicles.While it's clear the federal government intends to move forward with the new tax, we'remissing a lot of details on who it will apply to, whether it will be weighted and how itwill be paid.Hello, I'm Andrew Sykes.I've been a business accountant for over 25 years.I talk about business, money and the economy to help you get ahead.Welcome to talkBIG.Today, we're going to talk about why the government wants a road user charge to tax EVs,how it might be implemented and whether this is the best way forward for Australia.When we consider the government's announcement of a new 2035 emissions reduction target of62% to 70% below 2005 levels, is this charge another step towards achieving that goal orwill it actually discourage road users from adopting more sustainable practice?Joining me from Brisbane, I have RSM Australia's National Head of Tax Sam Mohammad and RSMAustralia's National Sustainability Lead Nicole Mohan.Welcome both Sam and Nicole, how are you today?Lovely to be here.Thanks, Andrew.Good thanks as well.Joining from sunny warm Brisbane.So a little bit about Sam.Sam has close to 20 years’ experience advising on indirect taxes like GST and the fueltax levy.He's a prior member of the ATO's fuel tax liaison group and a regular presenter at the TaxInstitute and other seminars and conferences.Sam's a current member of the Tax Institute of Queensland's statetaxes subcommittee, so well qualified to talk to us today.And from the sustainability angle, Nicole has over 15 years of experience working for RSMin both Australia and Los Angeles.As RSM's National Sustainability Lead, she plays a key role in driving RSM sustainabilitygoals and is a registered greenhouse and energy auditor.Nicole's managed numerous engagements for the Clean Energy Regulator under the NationalGreenhouse and Energy Reporting Safeguards Mechanism, Renewable Energy Targets andEmission Reduction Fund.So that's quite a mouthful there, Nicole.They're big jobs too.Yes, I was surprised they didn't use the acronyms.Too many acronyms.Always a lot in ESG.So Nicole, first question to you.Why does the government want to introduce an electric vehicle road user charge inAustralia?Okay, so I guess this is really about equity.So, it's ensuring that all road users contribute to road maintenance, as currently users ofEVs avoid that fuel excise.We've seen that as vehicles become either more fuel efficient or don't need fuel atall, as in the case of EVs, the revenue collected from the fuel tax is dropping.There are some interesting facts in regards to the fuel excise.Fuel excise represents about 38% of all road-related revenue.Registration is about 30% and stamp duty 14%, while tolls and council rates make up thedifference.Some other interesting facts, total road-related revenue from all levels of governmentin 2023 was $31 bnand total road expenditures from all levels of government in 2023 was $38.6 bn.This leaves about $7.7 bn in roads expenditure to come out of other taxes.There are details still missing on how this charge will be structured and whoit will apply to and how it will be collected, which I guess we'll talk throughit for the rest of the session.And if I could just jump in, sorry, Andrew, if I could just jump in with a couple ofadditional figures, which might go towards, I guess, the impetus as to why a road usercharge and why now.And as Nicole kind of touched on, we're at a point where the revenue from road user orfrom excises is declining in real terms or staying roughly steady.And part of the reason is there is an ongoing shift towardsEVs, but there is also a shift towards more fuel-efficient vehicles.Leave aside the fact that we have vehicles that actually pay no excise.You also have greater distances being travelled.You have more damage being done to roads, but you actually have less revenue beinggenerated.So, the current excise model is being seen as effectively broken or at least not fit forpurpose.Now that doesn't necessarily create the business case for a road user chargebut it creates the need to consider an alternative to the current excise model because inrelative terms, as a percentage of total revenue that can be used towards more and moreexpensive roads, it's not generating anywhere near enough to be able to cover the entirereason it exists, which is for road maintenance.So that's part of the reason why we're having this conversation is simply the excise modelitself is not fit for purpose.Now, how does that figure in, Sam, when we have the Australian Automobile Associationasserting that over the decade to 2023, only 57% of fuel excise was reinvested in landtransport projects.They're essentially saying we're paying the excise and it's not actually going backinto roads.Is that correct in your experience?It's probably a fair comment, but it's a portion of the whole truth.So, the money that's raised, despite the fact that the way the government's presented isthis is money that is raised to then go into road projects, legally that's not how itworks.Legally, the money is collected and it goes straight into consolidated revenue, which sitsat the federal government level, which is then allocated towards road projects.So it's not dollar for dollar that that money has to go towards road transport products.What we then have is, as Nicole touched on, is we actually have a range of differentsources of revenue that go towards constructing and then maintaining roads.But we also have different levels of governments who are responsible for different typesof roads.So, the way you slice and dice these numbers... it’s quite a difficultexercise to say. If you're traveling, say for instance, on the Pacific Highway,how much of that is maintained by the federal government? You then take an off-road, howmuch of that is the state government? You then take a side road, how much of that is localgovernment.So coming up with the numbers to maintain the entire road network and who's responsiblefor it is tricky.Yeah, so as a road user and somebody who's not an expert in this area, I would havethought that the fuel excise all just goes to maintain the roads.does it more correctly go towards building new roads or is it for maintenance of oldexisting roads?Well, in theory, it's supposed to go towards maintaining the existing road network.But the way the money goes is it just goes into a big pot for government.And so it can be spent, that money that is raised from excise can be spent building ahospital.It can be spent on any of the government priorities.It's not allocated constitutionally towards road projects.That's just, I guess, a notional way of thinking about why we're raising the tax.That's the reason the tax existsbut it's not the reason why that money that is raised is actually spent.That may not be like for like.And Nicole, you did mention an equity issue.So we are potentially faced with a situation where one group of road users is paying a lotmore tax than the other.Regardless of what it's used for, we are taxing road users differentially at the moment.So that equity one is a good point.But how does this go towards impacting on our climate targets?Definitely.As we consider this road user charge for electric vehicles, it must definitelyalign with our climate targets.Most recently the Australian government announced on 18 September that we have a new 2035emissions reduction target,which marks a major step towards achieving that net zero by 2050 and we also have a netzero plan which outlines how that target will be met.So considering that we have to get to, I guess achieve our 2035 emissions, which it seemsfar away now, but it really isn't.We must carefully design this road user charge to avoid penalising,as I mentioned, those who drive less or those who live in rural areas and we should alsoincentivise EV low-emission vehicles.So, the best way is when considering this charge, it should be a universal distant basedcharge that perhaps incorporates vehicle mass and emissions as well and it should reallyrewardlow-emission choices, ensure fairness across income groups, and this will also helpconsider our broader sustainability objectives and will really help support our transitionto net zero.Yeah, so picking up on a point you made there, do we think that this will be a universalcharge or will it only applyis this just the first part of a road user charge that will then extend...For example, we note that New Zealand has a charge on heavy vehicles.What's your view on that?My personal opinion is that I believe it should be a universal charge because this willensure that fairness across all households, so low-income and high-incomehouseholds and this could be made to be seen as the RUC as a fairer system.Yeah, because there is an element of fairness in the excise on fuel in that the more youdrive and use the roads, the more tax you pay.So, it's a bit of a use of pay.Do you think this could be the more you charge?Is there any thoughts on that, tax the electricity supply, pay excise on electricity goinginto the vehicles?I might just jump in with an observation just around the difference between excise androad user charge, which goes towards the point of fairness and equity.One of the issues with the current excise model and the way it's applied is at the moment,it's applied to combustion engine vehicles, so petrol and diesel, not applied to EVs.Now, when you do the modeling,traditionally, people who are on a higher socioeconomic income, they can afford the EVs.They get FBT exemptions, they get concessions in terms of rebates, they have higherincomes, they can afford the EVs.So when you actually look at the distribution of who pays the excise, it's actually moreat the lower end rather than the higher end.So leave aside the actual mechanics ofhow a road user charge would be applied.There's already an equity point here that people who can, I'll say less afford to pay taxare in fact bearing a higher burden of the tax.So that's part of the reason for why something for EVs.Now, I guess I take the point around emissions, but when we then come to look at, well,the distance-based... At the moment, there is a, I guess aproxy between how much fuel you buy and how much you might travel.But it's not like for like.You could poorly maintain a vehicle, you will buy a lot more fuel and travel lessdistance.A more traditional or a more refined road user charge would generally link per kilometrestravelled to the charge itself.So it may as a very simple example, a road user charge could simply be on 1 January,you take a photo of your odometer, send that off to whichever revenue authority is goingto look after this.31 December same year, you'll send them another odometer reading.The differential between the two, you pay a rate per kilometre, which has a much strongerlink between the actual distance charged compared to the current model, which typicallyrewards those cars that are more efficient, to the point of being not taxed at all.So there is...a closer linkage between the damage that a car may end up doing to a road and actuallypaying some of that and the other point to note is that as a, again, as a very rough idea,your standard EV is generally heavier than your standard petrol or diesel engine car andif you look at how much damage relative they are doing, it's generally going to be on theEV side.So at the moment, as I said, there's a case for changeand then there's a discussion to be had as to what does that change look like?Okay, so a change away from excise tax to road user charge as a total solution.Not a total solution because there's still equity issues to play out here, which have beenhighlighted by various, I guess, stakeholders.So one issue may well be there are different segments of the community that may forwhatever reason have to travel further.So if you're in a rural community, you may have to travel a further distance than someonewho's sitting in the city.Does that mean that there are differential rates depending on which postcode you may startin or whether there should be super rates if you're traveling in a CBD during peak hours?Whatever that might look like, I think there are still questions of equity that exist evenif you had a flat rate per kilometer because it doesn't impact everyone equally.There's some really good points there, Sam, and it's certainly got me thinking beyond thesimple application of a flat charge or a fairly easy charge.yeah, arguably that would be yet another piece of lodgement into a government that isstruggling to deal with the amount of bureaucracy at the moment.So there's some difficulties in administration.Nicole, do we have any evidence that these kind of charges make a difference in theadoption of electric vehicles?Yeah, definitely.think considering all of Sam's points of what we just discussed, there is a risk as wellthat if the charge is perhaps seen as too high or implemented without considering thosebroader benefits, this will definitely hinder our transition to net zero and also, Iguess, our transition to low carbon mobility and adoption of EV vehicles.In order to meet our new climate targets, EV adoption is actually a centralpillar of achieving them.So again, we need to make sure that this rewards, ensures fairnessamongst all and rewards everyone and really does support Australia's overall goals.Yeah, so if we take that on board and then consider, you know, trying to achieve thosegoals, but also recognising a user pays approach to roads and the cost of maintainingthem.Are there any other ways that we could encourage EV adoption in the face of a charge?yeah, so one option was how the revenue from this user, this road user charge will be used.Without any clear communication of how this will be used, the public could seethis as just another revenue raising measure rather than something to supportclimate action. And then again, this could erode that trust and willingness for people toactually purchase an EV.So in terms of actually using the funds from that road user charge revenue, some ideas aremaybe we could use it to invest in sustainability initiatives.So examples could be funding more EV charging networks or ensuringput more money into public transport and those road safety upgrades thatwe talked about as well.So within sustainability, if we see that circularity and that positive feedback loop, thiswill really help maintain and support momentum from the public.So finding other ways to make EVs attractive to use.Do we think that is it more of an impact from EVs or maybe if it was more expensive totravel, was a user based charge or kilometre based charge as Sam was talking about.Would less driving have more impacton our climate change goals, so less driving in general because people are more consciousif there's a cost to the kilometres they drive.Would that have more of an impact on our climate goals than EVs themselves?Yeah, definitely.So if people are driving less and perhaps considering alternative transport modes like,yeah, public transport, cycling, even carpooling, this would definitely encourage users tohave that sustainability focus in mind.And this would definitely help with achieving our goals.Yeah, so thank you.If we now move away from individuals and consider, because we also have corporates thatown vehicles as well.Sam, do you think this tax would affect companies moving into fleet electrification?Yes, but you've got to look at the whole picture here.So, the point I think you were raising before is almost a distinction or a trade-offbetween, do I still buy a petrol car?Do I move to an EV?Even under states already, so NSW, WA and Victoria have previously tried toimplement a road user charge.And I'll come back to Victoria's in a second.Even under the mostI'd say generous model, the most that the average user was going to pay roughly equivalentwas about $400 a year.Under the current model, a typical person will pay roughly about $1,200 in excise.So like for like, if you were jumping in an EV relative to jumping in a standard petrolcar, under the road user charge, at the rates that were being set, you would be payingless.Now that sends a signal to the market that EVs are a better choice relative to travelingin a petrol car.Also bear in mind that outside of just the road use to charge versus excise debate, thereare a range of other incentives that were available both at the federal level and at thestate level for incentivising people to move away from petrol cars or at least inefficientpetrol cars and moving towards full EVs.Now, you'd have the FBT, you've had direct cash rebates, you'vehad discounts on charging stations.So, there's a range of other incentives.There is, on one hand, there is a mixed message here to say, hang on, we're gonna starttaxing EVs, okay.But the bigger picture is those incentives available to EVsthat are not available to other cars.The other point is that you forward model what the EV uptake over the next 15 to 20 yearslooks like.There is a critical point at which is going to be very difficult to implement a road usercharge once you've got 50% to 60% of the market in EVs, relative to bringing it in now whereroughly about 7% to 10% of the market is EVs.So, if you're going to do it, do it early.That's where the government's trying to get to.And again, they can kind of figure a lot of the detail out as they go along and tweak itto the extent that there are any discrepancies and exemptions orcarve outs that need to be made.But what they wanted to do is to get ahead of trying to bring something in when the wholeexcise model falls down and you've got too many EVs on the road to start taxing them. And they all vote, right?You know, there's a trade-off in terms of timing.The other thing I wanted to bring in is the constitution.So this is not a castle type argument.The constitution becomes relevant because the different states originally imposed orsought to impose, excise.And an affected driver in Victoria took the case through to the High Court and had a win,which effectively said states cannot impose a road user charge of this nature because it'san excise.And excises, under the Constitution, can only be levied by the federal government.So, as much as the federal government kind of sat back and happily let everyone else imposeit, they're now the ones stuck with it going, well, we're the only ones that can nowimpose a road user charge because the states can't because they'reconstitutionally barred from doing so.So that's, as a collective, that's kind of created the case for change.Okay, so really a bit of sticker shock there, just thinking a new charge will come in, butthere is potentially still a relative cost advantage running an EV of what, about $800 ayear when it comes to tax.I do like, with a little bit of a cynical grin, the view that bring it in now while itwon't cost as many votes,arguably a sensible strategy from the government.Purely my interpretation not RSM's.Yeah, I tend to agree with it, Sam.I think it's a good observation.So Nicole, looking at companies still and companies have to consider their decisionsaround emissions reporting, will this influence those decisions?Yes, certainly.So I guess if we do the introduction of this road user charge for EVs, it will most likelyinfluence how companies do report.If there are any increased costs, this may make companies closely monitor andactually consider the way that they use their fleet.And obviously, if the emissions number is getting higher, then companies mightactually look to reduce their emissions through other means.So they might look to purchase offsets.They could look at, obviously, other incentives within the business, lighting, how theyrecycle waste, those sort of initiatives.And they mightin terms of actually using fleet and vehicles, companies could actually exploreoptimising delivery routes, perhaps looking at, doing everythingall in one go or also partnering with other low-emission transport providers.But essentially in terms of emissions reporting, we need to make sure thatcompanies need to ensure that transparency is key and it is really essential formaintaining credibility within emissions disclosures.Yeah, so really interesting points there on how it can change things.Do you think it will encourage innovation in EV design or even alternate fuels, Nicole?Yes, certainly.I guess as Sam mentioned before, EV vehicles are actually more heavy.So, there might be innovation considered in making them lighter or looking at anyother materials that could be used.There might also be other research and investment into alternative fuels.and perhaps other technologies that could also help further reduce emissions and operatingcosts.Yeah, thank you.Sam, you have raised a few points and issues around it.If we go to your tax background can I ask you, do you think there's any, what are thedifficulties in introducing this type of legislation?So, I'll leave the political discussion about how difficult it is to impose and create newtaxes to one side.If we're just looking at the design of a road user charge, probably the fundamental pointis around recording of the base of the tax.Now, if we use the base of the tax as the number of kilometres travelled, that's all welland good, but there's got to be a mechanism by which that is tracked.Now,As I said, one mechanism might simply be take a photo at the start, the end.Now, the cynic in me suggests that you could well take photos at different points in timeand say, well, that's my current odometer.What it could lead to, and this is, I guess, a follow on suggestion.This goes back to, roads user charging and it is not a new idea.This has been around for a long time.It's been mentioned in the Henry review.It was an idea that was championed back in 2010 and kind of died a slow death.We're now talking about it again is we are now moving towards vehicles that are tracked.So without needing you necessarily to have any kind of friction point of actually doinganything, the government may well may well have access to your data and it will know thatyou've travelled a thousand kilometres this monthand it could then use that information to then just send you a cheque or alternatively,just deduct it from your account, whatever that might look like, not overly dissimilar toa total account.So there are a number of challenges in terms of calculating and capturing thatinformation, but potentially we're moving to a model that suggests maybe it doesn'trequire you to do anything and maybe it doesn't require the government to do anythingthrough the use of data, whether you want to call it AI.Whatever it might look like, we could end up with a fairly frictionless model.But there are a number of non-tax related issues that come with that, leave aside thepolitical privacy, for instance.Would you really want the government to have that access to knowing how far you'retravelling, potentially where you're traveling, at what times you're traveling, if wedecide to have different rates for different times to kind of manage traffic.So there's a range of non-tax issues with bringing some of those issues in.But the flip side is, is it fairer potentially relative to excise, which has itschallenges?It is, but, you know, they're all issues for government to resolve.Yeah, so we did note in the research for this that Iceland already has a charge as theonly other jurisdiction with an EV charge.I think it's just an EV charge.They're talking about transitioning to in-vehicle units, which would be an interestingpolitical proposition here in Australia to allow the government to track your vehicle.The other thoughts there are also around using like state averages, district averages, etcetera and that would go a long way to what you were talking about before, Sam, which is aroundregional or country users versus city users.do we think, asking both of you this, do we think there's a better alternative to increasethe equity in who's paying for the roads?Leave aside all the challenges, I do think of road use at charge in its purest form,provides the best opportunity for a fairer and more equitable system, overcoming all ofthose challenges I've noted before in terms of the regressive nature of excise.Mentioning before around, you know, the respective damage that certain vehicles do.You can have different rates for different types of vehicles and making itrelatively simple to administer if, for instance, we go down the path of government oranother third party having access to specific data to be able to impose a tax.So in a pure sense, I think a road user charge makes sense, but there are obviouslychallenges with rolling it out, implementing it, and making sure it works for all segmentsof the market.I think, yeah, agree with that and I guess from the sustainability perspective, agree,there's definitely both those risks and opportunities.As we mentioned before, if it's structured poorly, could discourage EV adoption,impact those lower income households, and perhaps even, slow down organizationsor corporations changing to a fleet of EV vehicles.But if it is carefully designed with all those factors that we talked about and if they areconsidered, then it can definitely support those behavioral shifts and it can help driveinnovation and also help us achieve our climate goals.So yeah, I don't know if there's an alternative, a better alternative.Yeah, like many taxation issues and equity issues, it's really complex.And what can appear to be quite a simple measure or a simple argument a lot of layers to it.We're getting some online feedback about this and the sentiment's mixed.And I would suggest it's probably more negative if you own an EV and more positive ifyou're watching EV ownersnot paying excise tax and that's anecdotal comments that we've received and also itsarguments about whether it's fair, how to measure it, whether we should scrap it entirelyand just raise revenue elsewhere and there's certainly a lot of feedback about how it beadministered and the pain of doing that tied in with concerns about the environmentalcommitment.Both of you have outlined a lot on those today.Really, overall, it's a really complex issue and we are getting quite a simple solution.And generally, our view is that if it's done well, it can provide equity and fairness intaxation because roads need to be paid for somehow.So thank you very much for joining us today for the talkBIGepisode.I've been your host Andrew Sykes.I'd encourage all of our listeners to subscribe to our podcast wherever you'd get yourfavorite, whatever your favorite platform is.Nicole and Sam, any last thoughts to add before we sign off for this episode?The only last thought I have is it'll be interesting to see how quickly the governmentmoves on this.None of this is new.None of this is, something that the governments didn't know about before.So, the fact that we're still talking about implementing something 15 years after it waslast suggested suggests that there's still a little bit to go.Yeah, terrific.Yeah and I guess just from my point of view, the success of this will depend onhow well it integrates with our broader climate commitments.And from my perspective, I think if it integrates, it will be supported.Terrific.Thank you, Sam.Thank you, Nicole and I invite our listeners to tune into our next episode of talkBIG.Thank you for joining us on talkBIG.If you found this episode helpful, please subscribe and leave a review.Thank you.

Andrew Sykes

Host