Sydney, NSW – Electric vehicle (EV) owners in New South Wales are facing a significant new financial impost, with the state government confirming its intention to introduce a road-user charge from July 2027. NSW Treasurer Daniel Mookhey reiterated the state’s plans at a recent inquiry, stating that the charge will proceed despite a similar scheme in Victoria being deemed constitutionally invalid by the High Court.

The proposed charge will see battery electric vehicle drivers pay 3 cents per kilometre, while plug-in hybrid electric vehicle (PHEV) drivers will be charged 2.4 cents per kilometre. The NSW government projects this levy will generate an estimated $440 million in revenue over its first three years of operation.

This announcement, made on July 31, 2026, puts NSW on a collision course with the federal government’s preference for a national road-user charge framework. Mr Mookhey acknowledged this preference but affirmed the state’s commitment to implementing its own legislation in the absence of a federal solution.

“We’ve made clear our view that we do think that there is a logic that there be a national system,” Mr Mookhey said. “In the absence of a national system, it remains the intent of the NSW government to enact the law that was passed by the previous parliament.”

The Precedent and the Policy Divide

The decision by NSW to press ahead with a state-based road-user charge comes after a significant legal challenge in Victoria. In 2023, the High Court of Australia ruled Victoria’s similar EV road-user charge unconstitutional, stating that such a tax could only be levied by the federal government. This ruling created a precedent that many expected would deter other states from pursuing similar charges. However, NSW appears to be seeking a workaround, with Mr Mookhey suggesting the Commonwealth could “refer its powers” to NSW to avoid a repeat of Victoria’s legal outcome.

The move highlights the ongoing policy fragmentation surrounding electric vehicles in Australia. While the federal government has introduced incentives like the Fringe Benefits Tax (FBT) exemption for eligible EVs, many state-level rebates and concessions have been wound back or exhausted. For a comprehensive overview of remaining incentives, refer to our guide: Australian Energy Rebates in 2026: Your State-by-State Guide After Federal Relief Ends.

The introduction of a per-kilometre charge will add a new variable to the total cost of EV ownership for NSW residents. For an average Australian vehicle travelling approximately 33 kilometres per day, or around 12,000 kilometres annually, a 3-cent per kilometre charge would equate to an additional $360 per year for a fully electric vehicle.

This comes at a time when EV sales in Australia are surging, with battery electric vehicles accounting for 23.4 per cent of all new car sales in June 2026 alone. More EVs were sold in the first half of 2026 than in the entirety of 2025, demonstrating a significant shift in consumer preference. The market has also seen an influx of more affordable models, intensifying competition and driving down purchase prices. Brands like BYD have recently announced new offers, including free on-road costs for some models, further stimulating the market.

However, the additional running cost in NSW could temper enthusiasm for some prospective buyers, particularly those on tighter budgets. While EVs generally offer lower running costs compared to petrol cars due to cheaper ‘fuel’ and reduced maintenance, adding a per-kilometre tax erodes some of that advantage. Existing costs such as public charging, which can range from 50 cents per kilowatt-hour, also contribute to the overall expenditure. For more details on charging costs, see our guide: Public EV Charging in Australia 2026: Costs from 50c/kWh, Reliability & Avoiding Headaches.

The Broader Picture: National Consistency Needed

The NSW government’s determination to implement its road-user charge underscores the complex and often uncoordinated nature of EV policy across Australia. Industry bodies and consumer advocates have consistently called for a unified national approach to EV incentives and taxation to provide certainty for both buyers and manufacturers. A patchwork of state-specific rules can create confusion and disincentives, potentially slowing down the broader transition to electric transport.

As the July 2027 implementation date approaches, attention will remain on whether the federal government will engage with NSW to develop a more harmonised national framework, or if the state will proceed unilaterally, setting a potentially divisive precedent for EV taxation in Australia.