2025 Guide to Vehicle Excise Duty (VED) in Australia

VED isn’t just a UK import; Australia’s version of vehicle excise duty is gaining traction in 2025, with new rules and rates that impact motorists, business fleets, and even electric vehicle owners. Whether you’re renewing rego or managing a commercial fleet, understanding the evolving VED landscape is crucial for staying compliant—and saving money.

What Is Vehicle Excise Duty and How Does It Work in Australia?

Traditionally, Vehicle Excise Duty (VED) refers to a tax levied on vehicles for the privilege of using public roads. While ‘VED’ is the term used in the UK, Australia’s equivalent comes in the form of state-based vehicle registration charges, luxury car tax, and—more recently—road user charges that mimic the VED model. In 2025, several states are experimenting with VED-style schemes as part of broader tax reforms and the push for road funding independence.

• State-based registration fees remain the mainstay, varying by vehicle type, weight, and emissions profile.
• Road user charges for electric vehicles (EVs) are being trialled, with Victoria and New South Wales leading the way.
• Luxury Car Tax (LCT) continues to apply federally on high-value vehicles, with thresholds updated for inflation in 2025.

For most Australians, the annual rego bill is the closest analogue to VED, but changes at both state and federal levels are blurring the lines—especially as Australia grapples with a declining fuel excise base due to EV uptake.

2025 Policy Updates: What’s New with VED and Road Charges?

This year, the key trend is a shift towards user-pays road funding. Here’s what’s new in 2025:

• Victoria and NSW EV Road User Charges: These states now require EV and plug-in hybrid owners to report odometer readings annually and pay a per-kilometre charge (up to 2.8 cents/km for EVs in Victoria). This is designed to replace lost fuel excise revenue and ensure all road users contribute.
• Greener Vehicles Incentivised: Some states, including Queensland and the ACT, offer reduced rego fees for low-emission vehicles. New South Wales is considering a sliding scale VED based on CO₂ output, similar to the UK model.
• National Reform Proposals: The Federal Government is reviewing options for harmonising state-based duties, with a view to a national VED framework that may eventually replace the patchwork of rego, stamp duty, and luxury car tax.
• Luxury Car Tax (LCT) Thresholds: In 2025, the LCT threshold is $91,387 for fuel-efficient vehicles and $79,659 for other vehicles. Any vehicle above these prices incurs a 33% tax on the value above the threshold.

The upshot? Vehicle owners face a more complex landscape, with duties and charges that depend on where you live, what you drive, and how much you use your car.

Who Pays VED (and Who’s Exempt) in Australia?

The VED system, as it evolves, aims to be fairer and greener—but there are winners and losers.

• Private car owners: Standard rego fees apply, but greener vehicles may qualify for discounts or exemptions.
• EV and PHEV drivers: Subject to new road user charges in some states, but still benefit from rego discounts and other incentives in others.
• Business and fleet operators: Face higher costs for heavy vehicles and luxury models, but may benefit from FBT (Fringe Benefits Tax) concessions if they choose EVs or low-emission vehicles.
• Exemptions: Pensioners, veterans, and some disability permit holders may qualify for rego waivers or discounts. Zero-emission vehicles in the ACT enjoy full rego exemptions through 2025.

For example, a Sydney commuter driving a Tesla Model 3 will now pay a road user charge of 2.5c/km, but enjoys a $250 annual rego discount. Meanwhile, a business buying a $100,000 SUV faces LCT on the $20,341 above the threshold, plus stamp duty and rego.

How to Minimise Your VED Bill in 2025

Staying savvy can mean real savings—here’s how:

1. Choose low-emission vehicles: Not only do you help the planet, but you also score rego discounts and avoid some road user charges.
2. Keep accurate odometer records: For EV owners in Victoria and NSW, accurate reporting is critical to avoid fines and overpaying road user charges.
3. Review fleet composition: Business operators should weigh the benefits of transitioning to EVs or hybrids, which can cut VED and LCT liabilities and attract tax concessions.
4. Check for exemptions: Pensioners and certain community groups should ensure they’re claiming all available discounts or waivers.

With a little research and timely action, it’s possible to reduce your outlay—even as new duties roll out.

Looking Ahead: What’s Next for VED in Australia?

With fuel excise revenue declining and infrastructure costs rising, the shift to a national VED or road user charge is only set to accelerate. Expect more states to trial distance-based charging, and a possible harmonisation of rego and luxury car tax regimes in the next few years. For motorists, staying informed is the best defence against bill shock—and an opportunity to make smarter, greener choices.