"Replacing tobacco excise with nicotine patch tax" - EV tax explained

Victorians who own electric vehicles will have to self-report how many kilometres they have driven when paying the new Zero and Low Emission Vehicles (ZLEV) Road-User Charge, to be introduced from July 2021.

According to a state government ZLEV Road User Charge fact sheet, drivers will need to report their odometer readings to VicRoads.

“You can do this when you pay your vehicle registration using the myVicRoads online portal. The myVicRoads online portal will generate a bill based on your reported odometer readings.

As with vehicle registration, you can pay your ZLEV road-user charge quarterly, semi-annually or annually, based on what works for you.

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“VicRoads will be contacting vehicle owners to provide more detail on their reporting obligations and the billing and payment process.”

Unlike the fuel excise, which is paid in relatively small amounts whenever you refuel, ZLEV drivers will have to pay a higher lump sum on top of their registration bill.

How much will ZLEV owners pay?

Under the ZLEV Road-User Charge zero-emission vehicles such as battery EVs and hydrogen fuel-cell vehicles will incur a 2.5c/kilometre charge, while plug-in hybrid vehicles will be charged at a rate of 2.0c/kilometre because they also contribute to the federal government’s fuel excise.

This means a BEV that travels 15,000km in a year will be up for a ZLEV charge of $375.

The fact sheet presents different scenarios including Patrick, who usually uses his Tesla Model S to commute to work and to get around on the weekends.

He typically drives 10,000km a year. Patrick will need to pay 2.5c/km – $250 a year in total – in distance-based charges.

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Then there’s Natasha, who owns a Mitsubishi Outlander PHEV.

“She drives about 20,000km per year. Natasha will need to pay 2.0 cents/km, or $400 per year, in distance-based charges. Natasha usually remembers to charge her car at home each night but sometimes she forgets," said Patrick.

"On those days, she fills her car with regular unleaded petrol and pays the associated fuel excise. She still needs to pay the ZLEV road-user charge, even when using petrol.

"That is why PHEVs are charged a lower per-kilometre rate than electric and other zero-emission vehicles."

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Conventional hybrid vehicles will not be subject to the ZLEV. However, they will no longer benefit from the $100 concession from their annual registration that BEVs, PHEVs and hydrogen fuel cell vehicles will continue to receive.

Defending the ZLEV charge

The Victorian Government has come under heavy fire from motoring and environmental groups when it announced the ZLEV at the weekend prior to the belated Covid-19 affected State Budget.

Electric Vehicle Council chief executive Behyad Jafari said the charge would dramatically set-back EV uptake and likened it to “replacing declining tobacco excise with a new tax on nicotine patches".

Federal Chamber of Automotive Industries (FCAI)’s chief executive Tony Weber, said would kill EV technology at its infancy.

But the Victorian Government justifies the ZLEV saying it is needed to ensure all vehicles make a fair contribution to the road network, “while recognising their environmental and health benefits”.

It says the charges have been structured so owners of these vehicles continue to pay less in taxes or charges than other vehicles.

It also points out the ZLEV does not impact existing incentives which promote the take-up of low emission vehicles, such as the motor vehicle stamp duty concession for all low emission passenger vehicles which produce 120 grams or less of carbon dioxide emissions per kilometre travelled, or the $100 registration discount.

The fact sheet also states the state government “will use the revenue raised from the first few years of this charge to invest in accelerating the adoption of zero and low emission vehicles. This will include new electric vehicle-charging infrastructure and reforms to enable electric-vehicle-ready new buildings.”

How many vehicles will the ZLEV charge affect?

According to the state government, around 21,100 ZLEV owners are expected to be affected by this new distance-based charge, and around 30,300 conventional hybrid owners will no longer receive the $100 annual registration concession.