Road User Charging, where to from here?

TIC CEO Tony McMullan

The recent High Court of Australia ruling that struck down charges on electric vehicle use under Victoria’s Zero and Low Emission Vehicle Distance-based Charge Act 2021 as unconstitutional, following a test case challenge from two electric and hybrid vehicle owners in the state of Victoria, serves to justify calls from the Truck Industry Council (TIC) that a holistic national review of the Road User Charging (RUC) scheme is urgently required.

While the above mentioned Victorian tax was specifically aimed at light vehicles and noting that the heavy vehicle RUC is and has been determined at a national, not state, level for a couple of decades now, the underlying issue is that the current road user charging model for all vehicles in Australia is fundamentally flawed in addressing where road infrastructure funding will be derived as we move to a low carbon future.

This premise was at the heart of Victoria’s Zero and Low Emission Vehicle tax.

The recent High Court decision was hardly a landslide victory, with the vote against the Victorian state based tax finding only a slender majority, a 4-3 vote.

Nonetheless, the ruling by the High Court found that the Victorian Zero/Low Emission Vehicle (ZLEV) charge imposed an excise, a tax on goods. As only the Commonwealth can impose duties of excise, this was beyond the power of the Victorian Parliament and the charge was found to be invalid.

The landmark decision has substantial implications for electric vehicle taxes in Australia, as only the Commonwealth can now impose such taxes.

As I noted above, nationally consistent, Commonwealth determined, RUC for heavy vehicles has been the norm for many years in Australia.

However, the current heavy vehicle RUC is flawed in the same way as current light vehicle road charging schemes, deriving its revenue from both registration fees for trucks and trailers, as well as a fuel excise on every litre of diesel purchased.

With the majority of the heavy vehicle RUC funds derived from the diesel fuel excise.

With no current mechanism to capture anything but registration funding from ZLEV trucks, the majority of RUC funding will diminish as we transition the heavy vehicle road freight sector to a low/zero carbon future.

The last review of the heavy vehicle RUC was completed by the National Transport Commission (NTC) in 2020-2021.

The NTC undertook a review of heavy vehicle Pay As You GO (PAYGO) charging fees in Australia at the request of, the then named, Transport and Infrastructure Council within the Council of Australian Governments (COAG). At that time, this was the first review of Australia’s heavy vehicle road user charging (RUC) scheme in over four years.

In 2020 TIC expressed an opinion that the NTCs review should be extensive and holistic, arguing the current RUC, that derived the majority of its funding from diesel excise, was fundamentally flawed in light of a global movement to alternatively fuelled trucks, most likely to be powered by electricity and hydrogen.

TIC postulated that the current RUC arrangements could not take Australian road transport deep into the twenty first century and that a significant overhaul of the current charging arrangements was required.

TIC suggested a RUC scheme that ensures that all vehicles pay proportionally for the damage, or lack thereof, they contribute to our roads, the safety they afford all road users, the public health outcomes they generate and the carbon emissions that they produce, would be a fairer scheme.

The RUC review was delayed due to the difficulties of consultation with industry during COVID, with the NTC making its final recommendations in December 2021 and the Infrastructure and Transport Ministers (ITMM) handing down their RUC decision soon after.

Sadly, as I reported in this column in September 2022, the NTC rejected the Truck Industry Council’s calls for a wide-ranging review of the RUC, detailing that the scope of their actions was governed by the request set by the COAG/ITMM ministers.

Hence the review process was a somewhat benign examination of the current PAYGO parameters. In TICs view, a missed opportunity.

The recent High Court decision justifies TICs’ previous calls for State, Territory and the Federal Transport governments to show leadership for the times and look beyond state borders and the current RUC scheme and to instigate a substantial review of the PAYGO road user charging scheme in Australia.

That work should investigate and develop a heavy vehicle RUC scheme to take our country out of the twentieth century and into the twenty-first.

Tony McMullan CEO, Truck Industry Council

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