Australian state trials of distance-based charging for electric vehicles.
Australia's states experimented with their own road user charges for electric vehicles starting in 2021, but a landmark High Court ruling in 2023 struck down Victoria's distance-based charge as unconstitutional. The decision confirmed that only the federal government can impose such taxes, forcing a shift toward national coordination after years of fragmented state-level trials.
$28.9B
annual
Road expenditure (2018-19)
12.2%
of new sales
EV market share (early 2025)
$10M
collected
Victoria RUC before invalidation
4:3
decision
High Court ruling (Vanderstock)
The Australian federation is currently undergoing a period of profound structural adjustment in the way road infrastructure is funded and managed. Traditionally, the nexus of road funding has been a centralized model, predicated on the collection of fuel excise by the Commonwealth and its redistribution to states and territories. However, the accelerating transition to zero and low-emission vehicles (ZLEVs) has fractured this stability, creating a policy vacuum that states have attempted to fill with a series of fragmented and often experimental road user charge (RUC) initiatives.
For over a century, the primary mechanism for recovering the costs of road wear and tear from light vehicle users has been the federal fuel excise. Currently set at approximately 51.6 cents per litre for petrol and diesel, this excise serves as a proxy for road use, as higher fuel consumption typically correlates with greater distance travelled and vehicle mass. However, as the Australian vehicle fleet shifts toward electrification (with electric vehicles accounting for 12.2% of new light vehicle sales in early 2025), this revenue stream is in what the Productivity Commission describes as a "terminal decline".
The Australian road network represents one of the nation's most significant capital assets, with total road-related expenditure reaching approximately $28.9 billion in the 2018-19 financial year. This expenditure is funded by a complex mix of federal excise, state-based registration fees, and general revenue. The core problem driving current experimentation is the emergence of a "fiscal gap" where EV drivers utilize the road network without contributing to the federal excise, despite often operating heavier vehicles that cause significant pavement stress.
In response to this looming revenue shortfall, Australian states have moved ahead of the federal government, acting as autonomous experimental laboratories. This has resulted in a fragmented landscape where different jurisdictions have adopted divergent rates, commencement dates, and administrative technologies. This fragmentation was recently curtailed by a landmark ruling in the High Court of Australia, which invalidated state-based distance charges, thereby forcing a reconsideration of the constitutional division of taxing powers.
Table 1: National road funding and revenue profile (estimates 2024-2025)
| Revenue/Expenditure Category | Estimated Annual Value (AUD) | Authority | Primary Mechanism |
|---|---|---|---|
| Fuel Excise Revenue | ~$11.6 Billion - $12.1 Billion | Federal | Cents per litre at the pump |
| Road Expenditure (All Levels) | ~$29.0 Billion | Federal/State/Local | Grants/General Revenue/Registration |
| Heavy Vehicle RUC (Fuel component) | Variable (Proposed 6% Increase) | Federal | Fuel Tax Act 2006 |
| Heavy Vehicle Registration | Variable | State | Annual Flat Fees |
| Light Vehicle ZLEV Market Share | 12.2% (New Sales 2025) | N/A | Growth trajectory post-NVES |
| Federal Infrastructure Pipeline | $242 Billion (5-year outlook) | Federal | Major Public Infrastructure Pipeline |
The data in Table 1 illustrates the vertical fiscal imbalance at the heart of the RUC debate. While the Commonwealth collects the bulk of user-based revenue through the fuel excise, the states bear the primary responsibility for the maintenance and expansion of the road network.
The individual states have pursued road user charging with varying degrees of aggression and sophistication. These efforts were largely characterized by "first-mover" logic, where jurisdictions sought to establish independent revenue streams that would be immune to federal redistribution or economic cycles.
Victoria was the pioneer of state-based RUC, introducing the Zero and Low Emission Vehicle Distance-based Charge Act 2021 (the ZLEV Act). This legislation represented the first active distance-based tax on light vehicles in Australia. Commencing on July 1, 2021, the Act required registered operators of ZLEVs to pay a per-kilometre charge for the "use of the ZLEV on specified roads".
The scope of the Victorian charge was expansive, covering all public roads within Australia, not just those within Victoria. The administrative mechanism was notably manual; drivers were required to submit annual odometer readings to VicRoads, with non-compliance potentially resulting in the suspension or cancellation of vehicle registration. By early 2023, Victoria had collected nearly $10 million from this charge, with $3.9 million collected in the 2022-23 financial year alone.
However, the Victorian experiment faced a significant legal challenge in Vanderstock v Victoria. The plaintiffs, Christopher Vanderstock and Kathleen Davies, argued that the charge was an "excise" within the meaning of Section 90 of the Australian Constitution, a power reserved exclusively for the Commonwealth. In a landmark 4:3 decision, the High Court agreed, ruling that because the charge was a tax on the consumption or use of a good (the vehicle) that bore a close relation to the good itself, it was constitutionally invalid. This decision effectively ended Victoria's independent RUC program and forced the state to begin the process of refunding millions of dollars in collected fees.
Landmark ruling
The High Court's 4:3 decision in Vanderstock v Victoria ruled that state-based distance charges on EVs are constitutionally invalid as they constitute an "excise" under Section 90, a power reserved exclusively for the Commonwealth.
New South Wales (NSW) adopted a more measured approach, legislating an RUC that was intended to commence either on July 1, 2027, or when EVs accounted for 30% of new vehicle sales. This "delayed trigger" was designed to balance the state's revenue needs with the goal of encouraging early EV adoption through incentives like the abolishment of stamp duty.
The NSW model proposed a charge of 2.5 cents per kilometre for battery EVs and hydrogen vehicles, and a 2.0 cent charge for plug-in hybrids, with rates indexed annually to the Consumer Price Index (CPI). In the 2025-26 budget, the government revised these projections to account for inflation, setting the rate at 2.974 cents per kilometre for BEVs. Despite the Vanderstock ruling, NSW has continued to evaluate its options, acknowledging that the invalidation of state-based RUC puts billions of dollars of projected long-term revenue at risk.
South Australia's journey with RUC highlights the political volatility associated with taxing clean energy transitions. In 2020, the Marshall (Liberal) Government proposed a distance-based charge for ZLEVs, bundled with a $3,000 purchase subsidy. However, following a change in government in 2022, the Malinauskas (Labor) Government fulfilled a campaign promise to repeal the "EV tax," arguing it acted as a deterrent to environmental goals.
Instead of a distance tax, South Australia has shifted its focus to "experimental" smart charging trials. Backed by a $3.2 million investment, these trials explore the integration of EVs into the state's high-renewable energy grid. The trials include:
Western Australia (WA) had previously pledged to introduce a light vehicle RUC in 2027, similar to the NSW model. However, the state's primary focus has remained on its sophisticated heavy vehicle permit and pilot systems. The WA Main Roads Heavy Vehicle Services (HVS) operates a series of period permits for Over Size Over Mass (OSOM) vehicles, which function as a de facto user-pays system for specialized transport.
Following the Vanderstock decision, WA has joined other states in calling for federal leadership. The Motor Trade Association of WA (MTA WA) has recommended a nationally consistent framework that replaces the fuel excise without disadvantaging owners of legacy internal combustion engine (ICE) vehicles.
Table 2: Comparative summary of state-based RUC initiatives
| State | Status (as of 2026) | Primary Mechanism | Rate (c/km) | Administrative Method |
|---|---|---|---|---|
| Victoria | Invalidated (Oct 2023) | Distance-based (ZLEV Act) | 2.8 (BEV) / 2.3 (PHEV) | Odometer photos/Manual reporting |
| NSW | Legislated (At Risk) | 30% Sales / 2027 Trigger | 2.974 (BEV) / 2.379 (PHEV) | Planned digital reporting |
| South Australia | Repealed (2022) | Incentives & Smart Trials | N/A | Smart Grid integration / V2G |
| Western Australia | Planning (Suspended) | Proposed 2027 start | 2.5 (BEV) / 2.0 (PHEV) | TBD (Likely Federal alignment) |
| Heavy Vehicle Pilot | Phase 3 Complete | Mass-Distance-Location | Variable | Telematics/Digital "Mock" Invoices |
The division of power regarding RUC in Australia is dictated by the tension between the Commonwealth's exclusive power to tax goods and the states' residual powers over transport and road management.
Under Section 90 of the Constitution, only the Federal Parliament can impose an excise. The High Court's ruling in Vanderstock has clarified that a distance-based charge on EVs is effectively an excise on the consumption of the vehicle. This means that the legal authority to collect RUC revenue for light vehicles now rests solely with the Federal Government.
Furthermore, the Federal Government maintains control over the New Vehicle Efficiency Standard (NVES) and import tariffs, which are the primary levers for driving EV uptake. This creates a situation where the Federal Government sets the pace of the transition through policy incentives, while simultaneously being the only level of government capable of taxing the resulting "fuel-less" travel.
While the Federal Government has the taxing power, the states own the physical road assets and maintain the vehicle registration and licensing databases. This creates a "limited practical capacity" for the Commonwealth to collect an RUC without the cooperation of the states.
State governments are responsible for:
The transition to a national RUC in Australia has been characterized by extreme caution and policy inertia, despite clear economic arguments for reform.
A primary reason for the slow progress is the inherent contradiction between the government's climate targets and its revenue needs. The Federal Government has set a target for EVs to account for a significant portion of new sales by 2030 to meet its net-zero obligations. Imposing an RUC (even one that merely replaces the fuel excise) is often viewed by the public as a "tax on EVs" that could stagnate uptake.
Politicians have been reluctant to introduce a new tax that could be perceived as punishing "early adopters" who are helping the nation meet its emissions goals. This led to the "wait and see" approach adopted by states like NSW, which deferred the tax until the market reached maturity.
Policy tension
Governments face an inherent contradiction: encouraging EV adoption to meet climate targets while needing to replace declining fuel excise revenue. This creates political reluctance to introduce what may be perceived as a "tax on EVs".
Australia's slow movement is also tied to the specific barriers facing EV buyers. High upfront costs and "range anxiety" (the fear of running out of battery charge in a country with vast distances) remain the primary concerns for consumers. Research indicates that broken chargers and incompatible payment systems in the existing "experimental" infrastructure networks have damaged driver confidence.
In this environment, introducing an additional distance-based charge is seen as adding a "handbrake" to a transition that is already struggling with infrastructure reliability. The persistence of "policy uncertainty" regarding RUC has further discouraged potential buyers who cannot accurately calculate the total cost of ownership over a five- or ten-year period.
The fragmentation of Australia's RUC policy is a symptom of deep-seated governance challenges, particularly the "vertical fiscal imbalance" that defines Australian federalism.
The states' rush to implement their own RUCs was an attempt to secure an independent, reliable revenue stream that was immune to the fluctuations of the GST redistribution process. In an era of declining state tax bases (such as the volatility of stamp duty), the "user-pays" model of RUC represented a "home run reform" for state treasuries.
However, this fragmentation led to significant inequities. A Victorian EV driver was charged for kilometres travelled anywhere in Australia, with the revenue staying in Victoria, despite the wear and tear potentially occurring on NSW or Queensland roads. This lack of geographic alignment is a fundamental flaw in a state-based distance charge.
The High Court intervention in Vanderstock revealed that Australia's constitutional division of powers is increasingly at odds with modern economic needs. The majority's expansive definition of "excise" has cast a "constitutional cloud" over other state-based levies, such as waste and gaming taxes. This creates a period of extreme governance instability where states are unsure of their fiscal authority, leading to a paralysis in infrastructure funding reform.
The fragmentation also revealed a lack of "customer-focused" thinking. Systems that required drivers to manually photograph odometers were criticized for being primitive and administratively burdensome. A national approach would allow for more sophisticated, automated solutions (such as those used in tolling or telematics), but the fragmentation of registries between states makes this difficult to achieve.
The persistence of "pilots" and "trials," such as the National Heavy Vehicle Charging Pilot (NHVCP), serves as a mechanism for governments to manage political risk and test technical feasibility without committing to a controversial national tax.
Pilots allow for the testing of technology that is not yet ready for mass deployment. The NHVCP Phase 3, for example, tested mass, distance, and location-based charging using commercially available telematics. By using "mock invoices," the government can show participants what they would have paid, allowing for a comparison against the current PAYGO system without actually collecting the tax.
This "proof of concept" phase is essential for building public trust. Research from Swinburne University shows that support for RUC increases significantly when the public is shown that the system is transparent, equitable, and designed to improve all transport infrastructure, not just roads.
The introduction of an RUC requires a "social licence" that the Australian government has not yet fully secured. Pilots allow for a "phased approach" that starts with sectors that are already highly regulated (like heavy vehicles) before moving to the broader public. This provides time for the government to run awareness campaigns and address equity concerns for regional and low-income users who have no alternative to driving.
Furthermore, pilots allow the government to address "fairness" arguments. For example, the NHVCP addresses the fact that current heavy vehicle charges are based on fuel consumption, which does not accurately reflect the road damage caused by different axle configurations. By moving to a direct RUC, the system can be made more equitable, but this requires years of data collection to get the "unit metrics" right.
As of early 2026, the Australian RUC landscape is in a state of flux, shifting from state-led experimentation to a forced model of federal coordination.
The Vanderstock decision has placed road taxation reform squarely on the national agenda. Federal Treasurer Jim Chalmers has indicated that the Commonwealth is "accelerating work" on a national RUC for EVs to offset declining fuel excise revenue. The 2025-26 federal budget is expected to include further details on how this charge will be structured, with a focus on "technology-neutral" systems that apply across all vehicle types.
Table 3: Projected EV market milestones and policy triggers
| Year | Projected EV Sales Share | Key Policy Event | Anticipated Impact |
|---|---|---|---|
| 2025 | ~12.2% | NVES Implementation / ITMM Meetings | Standardized emissions reporting; Federal-State alignment |
| 2026 | ~15-20% | Federal RUC Framework Announcement | End of tax exemptions; commencement of national RUC legislation |
| 2027 | ~30% | Legislated NSW/WA Start Dates (Original) | Likely transition to a single, unified Federal collection model |
| 2030 | >50% | Terminal Decline of Fuel Excise | Majority of light vehicle revenue derived from distance charges |
The data in Table 3 suggests that the "fragmented" era is nearing its end. The upcoming year is likely to see the Federal Government establish a unified approach to road user data collection.
Infrastructure Australia continues to project massive demand for road investment, with $1.14 trillion in construction activity anticipated over the next five years. At the same time, the National Transport Commission (NTC) is consulting on a 6% increase in heavy vehicle charges for 2026-27 under the existing PAYGO model. These parallel tracks (one focused on construction demand and the other on cost recovery) are beginning to converge.
Framework requirements
A unified national RUC framework must guarantee national consistency, ensure revenue hypothecation (transparently reinvesting RUC revenue back into the road network), and address externalities by moving beyond simple distance charges to include congestion and mass-based metrics.
The "experimental and fragmented" period of road user charging in Australia was a necessary, if chaotic, phase of policy evolution. It allowed states to test the limits of their fiscal authority and the public's tolerance for new forms of taxation. However, the High Court of Australia has decisively ended this period, ruling that the power to tax the use of vehicles is a federal prerogative.
The challenge for the next decade is for the Federal and state governments to move past their historical "governance friction" and develop a unified, nationally consistent RUC framework. Australia stands at a "fork on the pathway to reform". One path leads to continued ad-hoc policies and legal challenges; the other leads to a modern, sustainable, and equitable transport funding system that reflects the realities of a post-carbon world. The lessons of the state-based trials are clear: the technology exists, the economic need is urgent, but the governance must be national.
