As more Australians switch to electric vehicles, governments face a growing financial dilemma. Petrol and diesel drivers contribute to road funding every time they fill their tanks through fuel excise. Electric vehicle owners generally do not. Can that imbalance continue as EV numbers grow?

For more than a century, Australia's road funding system has largely relied on fuel consumption. Every litre of petrol or diesel purchased attracts Commonwealth fuel excise, generating billions of dollars each year.

The model worked well when almost every vehicle burned fuel.

Electric vehicles have changed the equation.

Drivers who charge at home from rooftop solar, or even from the electricity grid, can use the road network without paying fuel excise. While they still pay registration, insurance and other charges, their contribution through fuel taxes is often little or nothing.

The question is no longer theoretical.

As EV ownership grows, governments will eventually collect less fuel excise while still facing the same costs of maintaining highways, bridges, local roads and transport infrastructure.

Is the Current System Equitable?

Supporters of the existing arrangements argue that encouraging EV adoption has environmental and energy security benefits.

Removing fuel costs was one way to encourage Australians to adopt cleaner technologies during the industry's early years.

Others argue that road funding should follow road use.

From that perspective, whether a vehicle runs on petrol, diesel, hydrogen or electricity should be irrelevant. Every driver benefits from the same roads and therefore should contribute toward maintaining them.

The debate is shifting from environmental incentives to long-term fairness.

Victoria Tested the Idea

Victoria became Australia's first state to introduce a distance-based road user charge for electric and plug-in hybrid vehicles.

Rather than paying fuel excise, EV owners paid a charge based on the number of kilometres travelled.

However, the High Court later ruled the scheme invalid because it effectively imposed an excise, a form of taxation reserved to the Commonwealth under the Australian Constitution.

The decision did not say road-user charging was a bad idea. It simply found that Victoria did not have the constitutional authority to introduce that particular tax.

The policy question therefore remains unresolved.

What Are the Alternatives?

Governments have several possible options.

Continue with fuel excise

This is the simplest approach but becomes less sustainable as EV ownership increases.

National distance-based charging

Drivers could pay according to the kilometres they travel regardless of fuel type.

This reflects road use more accurately but raises privacy concerns if vehicle movements are monitored electronically.

Annual registration adjustments

Governments could increase registration charges for EVs or reduce concessions over time.

While administratively simple, it does not distinguish between someone who drives 5,000 kilometres each year and another who drives 40,000.

General taxation

Road funding could increasingly come from consolidated revenue rather than direct road-user charges.

Critics argue this weakens the connection between using roads and paying for them.

Technology May Change the Debate

Modern vehicles already record distance travelled.

Future systems could allow motorists simply to report annual odometer readings, avoiding continuous GPS tracking while still linking road charges to actual use.

Such systems already operate in various forms internationally and may become more attractive as Australia's vehicle fleet evolves.

The Bigger Question

Australia's transition to electric vehicles is changing more than the automotive industry.

It is challenging one of the country's oldest methods of infrastructure funding.

The eventual solution will need to balance three competing goals:

• Fairness between different vehicle owners.
• Stable funding for road maintenance.
• Administrative simplicity and public acceptance.

Exactly how those goals are balanced remains an open policy question.

The Evening Times View

This debate is not really about electric vehicles. It is about designing a tax system that remains fair as technology changes.

Few Australians object to paying for the roads they use. The challenge is ensuring that similar road use attracts similar contributions, regardless of what powers the vehicle.

The longer governments postpone the discussion, the harder the transition is likely to become. A nationally consistent approach—rather than a patchwork of state-based experiments—may ultimately provide the clearest path forward.