EVs (electric vehicles) receive a Fuel-Based-Tax (FBT) exemption, which is not currently under immediate threat. However, the possibility arises that road user charges may be implemented for EV owners in the future.

The Australian government's approach to environmental initiatives and vehicle taxes has been under scrutiny, with the Productivity Commission voicing criticisms on the government's strategy of picking winners in various programs.

One such issue is the Road User Charge (RUC), a fee paid by vehicles to cover the costs of road maintenance. Currently, only electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs) pay an RUC, similar to the system being introduced in New Zealand. However, there's a push for all vehicles to pay an RUC, as constitutional and legal challenges have been a key impediment to its implementation.

Victoria introduced an RUC for zero and low emission vehicles in 2021, but it was overruled in the High Court in 2023 due to constitutional issues. Despite this, states like New South Wales, Western Australia, and South Australia have indicated an intention to introduce an RUC, with NSW scheduling it for July 1, 2027, or when EVs reach 30% of new car sales.

Meanwhile, the Australian Treasury has proposed abolishing the Fringe Benefits Tax (FBT) exemption for electric vehicles. This exemption, which saves thousands of dollars on EVs purchased via a novated lease and priced under the luxury car tax threshold, is currently in place. However, the federal treasury is against the FBT exemption due to its cost, which is reported to have spiraled beyond $500 million.

The Productivity Commission has recommended axing the FBT exemption, citing the introduction of the NVES CO2 reduction scheme as a reason. Economist Matthew Hobbs, an expert on government automotive policy, described the recommendation to axe the EV FBT exemption as a "kite flying exercise." He argues that the NVES or some other form of EV purchase subsidies should be retained to encourage EV adoption.

The Productivity Commission's stance against fringe benefits tax exemptions, including those for novated leasing, dates back to around 2015. The commission argues that the FBT exemption is the most expensive government climate policy, costing between $987 and $20,084 per tonne of carbon abatement.

In contrast, the commission is recommending a new emissions-reduction incentive for heavy vehicles. This shift in focus reflects the commission's economic stance, characterized by a dislike for market distortions, particularly subsidies.

As the government implements hard targets and supply-side regulations, the demand side is not aligning with these efforts. The road user charge has reared up again as the federal and state governments grapple with how to replace revenue lost as fuel excise returns decline. The economic forum is seen as a platform to test out ideas like the RUC and gauge public opinion.

The Productivity Commission's criticism of the government's approach to picking winners and its stance against subsidies have been influential. The commission's criticisms were a factor in the eventual shutdown of the Australian car manufacturing industry.

In conclusion, the debate over EV charges, FBT exemptions, and the RUC in Australia is complex and contentious. As the government navigates these issues, public opinion and the evolving economic landscape will play significant roles in shaping the future of Australia's environmental policies.

EVs (electric vehicles) receive a Fuel-Based-Tax (FBT) exemption, which is not currently under immediate threat. However, the possibility arises that road user charges may be implemented for EV owners in the future.