Government Hits Pause on Controversial EV Tax Amid Record Sales
CANBERRA – Plans for a contentious national road user charge for electric vehicles appear to have been shelved for the foreseeable future, as the Federal Government seeks to avoid stifling Australia’s unprecedented boom in EV uptake. The proposed tax, intended to replace lost fuel excise revenue, was widely expected to be detailed in the upcoming May federal budget.
However, in a significant policy shift, federal Transport Minister Catherine King has indicated the timing is not right for a new levy on EV drivers. The move comes directly after new data revealed a massive surge in electric vehicle sales, driven by record-high petrol and diesel prices.
“At the moment we’re trying to encourage as much electric vehicle uptake as we possibly can, we don’t want to disincentivise that at all, so there is a balance to be struck here,” Minister King told the ABC’s Insiders program.
“We want to try and not disincentivise electric vehicle uptake, particularly right at the moment when we are seeing such a surge in that, so it may not be the time for it right now.”
The government’s hesitation is a direct response to the latest sales figures from the Federal Chamber of Automotive Industries (FCAI). In March 2026, battery-electric vehicles accounted for a record 14.6 per cent of all new vehicles sold in Australia, almost double the 7.5 per cent market share from March of the previous year.
More than 15,800 EVs were sold in March alone, the highest monthly total ever recorded, as Australians increasingly seek alternatives to volatile fuel prices. The Tesla Model Y continued its reign as the nation’s most popular EV, and the third best-selling vehicle overall, behind only the Ford Ranger and Toyota HiLux utes.
A Contentious History and an Uncertain Future
The proposed road user charge, which would tax EV owners on a per-kilometre basis, was designed to address the decline in revenue from the federal fuel excise as more drivers switch to electric. Victoria was the first state to implement such a charge in 2021, but it was struck down by the High Court in 2023 as unconstitutional, paving the way for a federally administered scheme.
The policy delay has been welcomed by industry bodies who argued a premature tax would penalise early adopters and slow the transition to cleaner transport. The conversation around EV incentives is now at a critical juncture, with the popular Fringe Benefits Tax (FBT) exemption for eligible EVs also reportedly under review due to its significant cost to the federal budget.
This policy uncertainty comes as the Australian EV market becomes more competitive than ever, particularly at the affordable end.
New Models Heat Up the Affordable EV Market
The market momentum the government is keen to protect is being fuelled by an influx of new, more affordable models from challenger brands. Just last week, Chinese automaker GWM confirmed sharp pricing for its new GWM Ora 5, a small electric SUV set to arrive in June 2026.
| Model Variant | Drive-Away Price (AUD) |
|---|---|
| GWM Ora 5 Lux | $33,990 |
| GWM Ora 5 Ultra | $36,990 |
At the same time, MG Motor Australia used the Melbourne Motor Show to unveil a suite of new and updated models. The brand announced significant price cuts for its popular MG4 X-POWER performance model (now from $47,990 drive-away), showcased the larger MGS6 electric SUV, and surprised attendees with the reveal of an electric ute, the U9 EV.
With more affordable choices hitting showrooms and EV sales reaching new highs, the government’s decision to delay the road user charge signals a clear intention to let the market’s momentum continue. For now, Australian EV drivers can continue to enjoy the benefits of driving without the immediate threat of a new tax, but the long-term question of how to fund the nation’s roads in an electric future remains unanswered.