New South Wales (NSW) looks set to be the next jurisdiction to implement a distance-based road user charge (RUC) on electric and plug-in hybrid light vehicles, from 1 July 2027. From that date, EV owners will be subject to a charge of A$0.03095/km (US$0.0347/mile) and PHEVs A$0.02476 per km (US$0.0278/mile). It won't be the first in Australia to do so, as the state of Victoria implemented RUC on EVs and PHEVs in 2021, but this was cancelled in 2023.
The Parliament of NSW has now published a report into the forthcoming RUC.
Background
In Australia, RUC is a complex topic. For years the Commonwealth (Federal) Government studied and even piloted distance/weight based RUC for heavy vehicles, largely because multiple reports indicated that there would be economic productivity benefits from introducing it, alongside a wide range of associated funding and charging policy measures. In the meantime, heavy vehicles pay registration fees to the States and Territories, at unified rates, and when paying fuel excise duty on diesel, they can claim a 100% refund for diesel not used on public roads and a partial refund of the remainder (with the part that is retained called the "fuel based road user charge"). Since 2024, heavy vehicle RUC has largely been off the political agenda in Australia.
Then came electric vehicles (EVs), in sufficient numbers that it started to be a concern for future fuel excise duty revenues. Fuel duty is a Commonwealth tax (the States and Territories are not constitutionally permitted to levy such a tax), but is not hypothecated. States and Territories started being interested in whether they could charge a RUC for light EVs, so Victoria did so in 2021, only for a court case to go as far as the High Court of Australia, which struck it out as unconstitutional in 2023. That court case was supported (but not led) by the Commonwealth Government. I wrote about the decision (known as Vanderstock) at the time, as I agree with the dissenting opinions of the court. It was quite the stretch of interpretation to treat the Victorian RUC as an "excise tax" that influences the supply of electric vehicles (and therefore only within the Constitutional scope of the Commonwealth Government), but the decision stands.
However, parallel to Victoria, the NSW Government passed the Electric Vehicles (Revenue Arrangements) Act 2021, with nearly identical language to the legislation used in Victoria.
That Act means that from 1 July 2027, EVs in NSW will be subject to a distance based RUC.
The obvious conflict is that the Vanderstock decision essentially indicated that RUC should be implemented nationally by the Commonwealth Government, not by the states. but since the decision there has been relatively little said at the Commonwealth level about RUC.
A series of statements have been made by a few Ministers ranging from how important it is to charge EVs for road use eventually, to concern that legislation to enable this might not get passed by the Senate.
While there has been some work behind the scenes undertaken by officials, no decisions have yet been made. Meanwhile, sales of EVs in Australia (as in many countries) are at a record high. In the year to August 2026. 18.5% of new light vehicle sales in Australia have been EVs, with it being over 26% in the month of August alone.
NSW's legislation has not been amended or repealed (although the election in 2023 saw a change in State Government from the Liberal/National Coalition to Labor).
Public Accountability and Works Committee
Earlier this year, the NSW Legislative Council delegated to its Public Accountability and Works Committee a review into the operation of the Act, and in particular:
(a) whether the policy objectives of the Act remain valid, and
(b) whether the terms of the Act remain appropriate for securing those objectives.
It undertook its inquiry and has now published its report and recommendations. Most of the ten recommendations should not be a particular problem to implement. Two of them are not good ideas, but not impossible to implement.
The NSW Government needs to respond to the report by January 2027, which gives essentially no time to amend the legislation, especially since on 13 March 2027, there is a state election.
Report details
I’ve read more than a few reports from elected committees about various forms of road user charging and road pricing over the years, and I’m glad to say this is one of the better ones. By and large, most of the conclusions drawn are at least practical, and have some rational public policy basis for them, although a handful of them are not.
The report is overall positive and supportive of the implementation of RUC for EVs in NSW, notwithstanding some concerns.
Issues considered in the report include:
- Implications of the Vanderstock High Court of Australia decision on the legislation, including possible amendments to distinguish the NSW proposal from the Victorian policy
- Effects on EV sales
- Impacts of distance based RUC on different geographical communities and vehicle operators including rideshare, delivery drivers and dealerships
- Impacts on plug-in hybrid drivers
- Merits of pure distance based RUC vs including weight, fuel efficiency and congestion
- Hypothecation of net revenues
- National RUC for EVs vs. states going first
- Administration of a RUC
I won't summarise the whole 88 page report here, but it is
worth a read (PDF).
The concerns expressed are understandable and not unreasonable. It is worth noting that the Committee was chaired by a Green MLC (Member of Legislative Council), with the deputy chair from the Liberal Party. Besides them, there were three Labor, one National and one independent (Mark Latham) on the Committee. Only Latham made a dissenting statement, and that was to support weight based vehicle registration for EVs as an alternative.
A key recommendation was to proceed, regardless of progress at the federal level, which I believe is sound, albeit risky.
At the very least, it is clear that States and Territories could wait for a national RUC system and still be waiting one, two, three or even five years from now, mainly because the political will to proceed is tepid at best. That may be proved wrong in the coming months, but it is more likely than not that NSW pushing on with RUC will catalyse action from the Commonwealth Government which is more rapid than simply waiting for something that shows few signs of progressing fast.
I have summarised the recommendations below with comments in italics.
Recommendations
Recommendation 1
That the NSW Government ensure that any future road user charge for electric vehicles is designed and operationalised in a way that does not dampen or impede the uptake of electric vehicles in New South Wales.
Understandable, and easy to address. The basis for this was evidence that RUC when introduced in Victoria and applied to EVs in New Zealand, had no apparent impact on sales. Evidence in New Zealand is blurred by the removal of a major subsidy scheme that saw levies on some new cars used to subsidise the sales price of low emission ones. That brought forward EV sales, and meant that when RUC was applied to EVs in mid 2024, there was no effect on sales. There remains scant evidence that charging a few cents per kilometre for road use deters a purchase of an EV compared to a ICE vehicle that is already charged the same or more through fuel tax.
Key to complying with this recommendation is perhaps two elements:
- Ensuring administration and compliance for RUC for EVs is simple with minimal friction for owners. It should be easy to buy, have distance reported and be compliant, without prospective EV owners fearing not being able to understand or being fined inadvertently for getting it wrong. There are plenty of models for doing this - see New Zealand, Hawai'i and Oregon.
- Setting a rate for RUC, for now, that is cheaper than fuel excise. A rate commensurate to around half of the average paid by a light ICE vehicle may be appropriate, not least because it would around the same for a battery-electric hybrid vehicle. The proposed A$0.0395/km seems like it would do that.
Recommendation 2
That the NSW Government, in consultation with industry stakeholders, monitor the implementation of any future road user charge for electric vehicles in New South Wales with a view to:
• assessing any impact on electric vehicle uptake, and
• promptly identifying other unintended consequences that would undermine the strategic transition to electric and low emissions vehicles.
Agree. There is considerable merit in undertaking impact monitoring, perhaps for the first two years, of RUC on sales and any unintended consequences on users. Related to this is having flexibility to make regulatory changes at short notice to address any of these, and to take lessons from other jurisdictions about what to avoid (e.g. avoid over-complicating the passage of liability of RUC on vehicle sale or vehicle scrappage).
Recommendation 3
That the NSW Government consider an electric vehicle road user charge exemption for registered dealers of new 'in scope' low and zero emissions vehicles, to be applied up to a prescribed number of kilometres travelled on demonstrator models, and that the threshold be determined in consultation with industry stakeholders.
Disagree. The objective of this appears linked to Recommendation 1, but this is not a good idea. The best time to educate vehicle owners about RUC is when they purchase a vehicle new. This appears to be a call for a subsidy for new EVs, when similar exemptions don't exist for fuel duty or even tolls. It is likely to mean "demonstrator models" get used more by proprietors and staff of dealerships, and then when sold it is a transfer from taxpayers to buyers of those vehicles.
No other jurisdiction does this (noting Victoria had such a provision). In New Zealand, dealerships buy a block of RUC distance in advance and it is effectively included in the sales price. There is no great burden in having newly registered vehicles including a prepaid block of RUC kilometres, which is essentially like fuelling the vehicle. By contrast, in Oregon the initial OReGO program did not make provision for dealerships to offer RUC to vehicle owners, so they needed to be followed up around a year later to get enrolled with RUC or pay a higher annual registration fee. This is now being amended.
Recommendation 4
That the NSW Government consider hypothecating the future revenue collected under the Electric Vehicles (Revenue Arrangements) Act 2021 towards road maintenance and infrastructure.
Agree. This will help differentiate the RUC from the Victorian programme, but also allow for charges to be more closely linked to what is spent on the network, treating roads as a network utility. This could be done notionally, matching the net revenue collected to a specific allocation of funds for roads maintenance, or more formally (which would progressively grow in scale as RUC expands). Treasuries hate hypothecation because they want maximum flexibility over the use of tax revenue, but if NSW's RUC is to be treated not as a tax, but as a user fee, it should have a relationship to what is spent on the network. Furthermore, it is more likely to obtain public acceptability, if it is not treated as just another new source of revenue. I'll note that the now virtually stalled Heavy Vehicle Road Reform programme includes hypothecation for a future national heavy vehicle RUC.
Recommendation 5
That the NSW Government investigate fairer distance-based options for electric vehicle road users in rural, regional and outer suburban communities and light commercial vehicle operators without creating loopholes or adding to the administrative burden or complexity for drivers.
Agree, pending clarification of the problem. The report assumes that people living in rural, regional and outer suburban communities drive more distance in aggregate on average, than those in inner city communities. There is no evidence provided to support this. I'll note that in the United States, RUC America undertook a study comparing the impacts of introducing distance-based RUC to replace fuel excise for people in urban vs. rural locations and it was published in 2022. It concluded that in many cases people in rural areas did NOT drive greater distances, because they drove less frequently than residents in urban areas. Similar research in NSW would be informative and useful.
Some of the commentary in the report around delivery and gig worker drivers seems to ignore that such drivers face these fees now with ICE vehicles, paying fuel duty for driving more. Research might indicate that delivery drivers pay more in fuel duty per kilometre driven than the average, because of the amount of starting and stopping compared to private vehicle trips. It seems particularly questionable to want to cap what is charged for such vehicles, when EVs are likely to deliver considerable savings in energy costs already.
Notwithstanding this, there is merit in enabling the registration and certification of third-party service providers to collect RUC using telematics systems either as equipment already installed in vehicles or third-party devices, to measure distance by location. This would enable exemption of distance travelled off public roads and out of state, and for measurement to be automated. This could provide options for rural drivers and drivers located in border communities to avoid paying for travel in adjacent States and Territories. Note that Vermont has agreed to implement RUC for EVs, but requiring such an option be implemented two years later.
Recommendation 6
That the NSW Government amend the Electric Vehicles (Revenue Arrangements) Act 2021 to reframe the road user charge to have the character of a licence fee or fee for service, rather than a tax or excise.
Agree, noting that the timing to do this seems challenging at best. It should be a user fee for the use of public roads in New South Wales, and it could include a means to grant refunds for distance off of public roads or in other states, if evidence is given of proof of such travel. This could only be done after the event, and have an administrative cost to it.
Recommendation 7
That the NSW Government amend the Electric Vehicles (Revenue Arrangements) Act 2021, or use future regulations or any other appropriate mechanism, to introduce a differentiated distance-based regime in which the per kilometre rate takes into account:
• a vehicle's size and weight
• differences in battery performance and life for battery electric vehicles
• differences in emissions performance among low-emissions hybrid vehicles.
Disagree. This appears to be based on a misperception as to wear and tear on road surfaces generated by variations in weight among light vehicles. This is not supported by research commissioned by the National Transport Commission or seen overseas. Beyond the impacts of weather, there is very little impact of vehicle weight on road maintenance below the level of heavy vehicles (GVM >4.5 tonnes). Note New Zealand did use to charge light vehicles at one tonne intervals, with the rates varying by a tenth of a cent per kilometre. One tonne increments were scrapped for light vehicles some years ago to simplify administration.
The proposal to charge differently according to battery performance and life are highly problematic not least because such data is not collected in the motor vehicle register. It would be difficult to measure this and unclear the basis for varying charges, particularly as performance and battery life varies over time. The proposal to take into account emissions performance among hybrid vehicles (which in this case would be plug-in hybrids) also has problems around getting a reliable source of data to classify vehicles, and to incorporate it into the motor vehicle register. It is common to charge vehicles differently by Euro class, in heavy vehicle RUC systems in Europe, but that is for vehicles almost all of which are powered by diesel.
The relative impacts and merits of such proposals seem likely to be not worth the cost and complexity to implement.
Recommendation 8
That, with respect to the administrative arrangements to operationalise any future road user charge, the NSW Government commit to:
• keeping it as simple as possible for drivers to minimise the administrative burden
• fully integrating the charge within the existing administrative scheme for vehicle stamp duty, registration fees and licensing.
Agree. There should be a base level simple product for vehicle owners to interact with, such as a prepaid licence (as in New Zealand), an annual fee based on an estimate confirmed at registration time, or a regular invoice based on an average or submitted distance. It makes perfect sense to integrated with registration fees, but there needs to be a rapid commitment to the base level product that provides the most flexibility to users, while enabling alternatives either immediately or within a couple of years.
Recommendation 9
That the NSW Government continue to work with the Federal and state governments on road user charging policy, with a view to working towards a national road user charging system.
Agree, it should go without saying that a national system or nationally co-ordinated system is preferable to a patchwork of policies that risk incoherence.
Recommendation 10
That, absent a national road user charging framework and regime, the NSW Government proceed to implement the electric vehicle road user charge established by the Electric Vehicles (Revenue Arrangements) Act 2021 subject to the amendments outlined in Recommendations 1 to 8 above.
Agree.
Next steps
The NSW Government is expected to provide the Government Response to this report by 11 January 2027. This should give a clear indication of what happens next.
In the meantime, it is not impossible to expect that there might be an announcement from the Federal government in Canberra about RUC policy nationally (although few would bet on it). The Mid-Year Economic and Fiscal Outlook is due to be issued in December 2026, which would cut it fine indeed, but be timely to signal what might happen nationally. However, it is also quite likely that nothing will be signalled, given other government priorities.
