South Australia to tax electric cars from July 2021 and become first jurisdiction in the world to disincentivise EVs

South Australia is set to become the first jurisdiction in the world to disincentivise all-electric vehicles (EVs), with the state government announcing plans to make owners of zero-tailpipe-emissions cars pay road-user taxes from July 1, 2021.

Announced by SA treasurer Rob Lucas this week, the move will ensure all of the state’s users contribute to road funding, rather than just those who own vehicles with internal-combustion engines that run on petrol or diesel and are therefore subject to the fuel excise.

That said, it’s worth noting the fuel excise is collected by the Australian federal government and not at a state level. Either way, the revenue it generates will decrease over time as more road users buy EVs while roads will still need to be maintained and upgraded.

As such, Mr Lucas expects other states might follow SA’s lead soon, even though the new EV tax is only expected to add about $1 million to the state coffers in its first year.

He also stressed SA isn’t anti-EV, despite the unprecedented move, with the state spending $18.3 million on charging stations.

According to Mr Lucas, the specifics of the charges EV owners will have to pay are yet to be finalised, although the initial structure is set to be comprised of a fixed cost plus an additional fee for distance travelled, with road users potentially having to keep a record.

While he said the move wouldn’t disincentivise the local take-up of EVs, Electric Vehicle Council chief executive Behyad Jafari completely disagrees.

"While governments around the world are using every means possible to incentivise the uptake of electric vehicles, South Australia reckons they have it all wrong," he said.

"If the revenue from fuel excise is falling because South Australians are burning less foreign oil, that should be considered a blessing. Overall, it's good for air quality, it's good for the health budget, it's good for carbon emissions, and it's great for economic sovereignty.

“The last thing any sane government would do is try to hit the brakes on this trend.”

Mr Jafari added: "There's no special bucket of money for roads. Roads need to be paid for from general revenue just like everything else. There is zero need for the SA government to slap a big new tax on an emerging technology that delivers so much for the community.”

For reference, recent analysis from Ernst & Young shows that every road user who switches to an EV adds $1370 to government coffers and gives the Australian economy a $8763 boost.