Victoria’s EV tax “unfairly” levied, says state ombudsman

October 18, 2023: Victoria's EV road tax has been struck down

In a blow for the state, Victoria’s zero-emissions vehicle road-user tax has been deemed unlawful.

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Victorians who have paid the state government’s electric vehicle levy over the last two years have done so “unfairly”, a report into the cost-per-kilometre scheme has determined.

The state’s ombudsman, Deborah Glass, said that “thousands of people have been affected by the charge since it came into effect in 2021, many of them unfairly.”

The scheme, administered by Victoria’s Department of Transport and Planning, currently charges users of both battery-electric vehicles and plug-in hybrids at the rate of 2.8c and 2.3c per kilometre travelled, respectively.

Both amounts were increased on 1 July this year.

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It is designed to replace the federally-administered fuel levy, currently charged at 44.8c a litre on all fuel products.

As electric vehicle uptake continues, the fuel levy – which raises around $20 billion annually – is expected to decrease accordingly.

While a new federally-levied electric vehicle tax was hinted at by the federal government in August this year, it is unlikely to be rolled out before 2026 at the earliest.

Most other states and territories do not currently charge an EV levy; South Australia repealed laws to introduce a charge, while NSW will introduce a levy in 2027 or when EVs make up 30 per cent of sales, whichever comes first.

Other states like Western Australia will charge a levy from 2027.

The ACT currently charges 2.6c and 2.1c per kilometre for EVs and PHEVs, respectively,

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The ombudsman expressed disappointment that PHEVs were subject to Victoria's road user charge

According to the Victorian Ombudsman, the fact that PHEV users are slugged twice – once for traditional Commonwealth-based fuel excise based on their ICE travel and again for kilometres travelled on electric power – smacks of “policy made on the run (or not at all)”.

“Imagine buying an electric vehicle, and then being charged for more kilometres than you have driven, because 'this average calculation is bound by legislation',” she wrote.

“Or travelling thousands of kilometres on fuel in your plug-in hybrid vehicle in remote parts of Australia with no charging stations and being charged hundreds of dollars for road use, despite having already paid the Commonwealth fuel excise on all those kilometres.”

Heavy-handed governance of the scheme and an inflexible approach to solving complaints has also been noted.

There are also two High Court actions currently underway in Victoria, with the complainants arguing for the law to be overturned on the basis that the state government had no authority to implement it.

“Whether or not its validity is successfully challenged, this legislation is being administered unfairly,” Ms. Glass said.

“This needs to change.”