‘More the state can do’: Cheaper electric cars set to accompany new tax

Electric cars would be cheaper under a sweetener the Victorian government is considering proposing to crossbenchers in order for its electric vehicle tax to become law.

A pledge to encourage people to buy zero or low emissions vehicles in Victoria is expected to accompany the tax, which would be the first of its kind in Australia, when it reaches the upper house in early May after the government introduced the bill to the lower house on Wednesday.

One in four cars in Australia is expected to be electric by 2030.Credit:Getty

The Greens and Animal Justice Party MP Andy Meddick, crucial supporters for government bills in the upper house in recent months, say the tax alone sends the wrong message to prospective electric vehicle drivers.

On Wednesday, Treasurer Tim Pallas said he expected price parity between fossil-fuel-powered and electric vehicles by 2025 and federal government modelling has suggested 26 per cent of all cars owned in Australia will by electric by 2030. Yet zero and low-emissions vehicles made up just 0.7 per cent of total car sales in Australia in 2020, well below the global average of 4.2 per cent.

A duty collected by the state government is already included in the bowser price of petrol and diesel but is not applied to the electricity used to charge zero or low emissions vehicles.

Mr Pallas said he wants to establish a user-pays structure that will avoid a future dilemma where electric vehicles dominate new car purchases but owners pay little to no tax.

Treasurer Tim Pallas acknowledged Victoria could do more to incentivise electric vehicles. Credit:Paul Jeffers

“What that would mean is more and more weight will fall on the back of everyday motorists using petrol engines,” he said. “So in practical terms, the best time to start with that base system is as soon as you can.”

The average electric vehicle tax would be $230 to $260 a year, Mr Pallas said, compared with $600 for diesel or petrol engine cars and would raise $30 million over the next three years.

Victoria offers a modest rebate of $100 on registration for electric vehicles and duty rebates for expensive vehicles but Mr Pallas said he thought “there is more that the state can do in this respect”.

One source familiar with the crossbench negotiations said they expected the government would come to offer monetary incentives, possibly in the thousands of dollars, in the form of a rebate for car buyers or a reduction in stamp duties.

Animal Justice Party MP Andy Meddick said he could be swayed to support the user-pays tax.Credit:Morgan Hancock

Of 10 crossbenchers, only Reason Party MP Fiona Patten has voiced her support for the bill in its current form, meaning the government must sway two more crossbench MPs. She told The Age she agreed with Mr Pallas that it was necessary to install a user-pays system from an early stage.

Mr Meddick said he appreciated an electric vehicles tax would be a revenue stream for the maintenance of roads but in isolation it “sends exactly the wrong message that we want to punish people moving to electric vehicles”.

A poll of 2100 by consultancy Redbridge, commissioned by industry association the Electric Vehicle Council, showed more than 70 per cent of Labor and Greens voters in the seats of Richmond and Albert Park would be more likely to support the Andrews government if it made EVs cheaper through incentives.

Greens MP and transport spokesman Sam Hibbins was incensed by the tax on Wednesday, slamming it as “outrageous” and a “tax on clean air”.

“We’re in a climate crisis and transport is the fastest growing source of greenhouse gas emissions in Victoria,” he said. “We should be helping people make the switch to EVs by making them more affordable instead of putting up roadblocks.”

Sustainable Australia MP Clifford Hayes said he was similarly unconvinced by the timing of the tax.

“It’s just putting an impediment on an industry that is already struggling in Australia,” he said.

Think tank Infrastructure Partnerships Australia welcomed the “modest” tax and said it “will not retard uptake of electric vehicles, which will still be cheaper to own and run than a petrol or diesel option”.

“This legislation can be combined with future incentives to make it easier for Victorians to buy an electric vehicle, meaning we can have our cake and eat it too,” said chief executive Adrian Dwyer.

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