Victorian EV tax judged invalid

UPDATED 18/10/2023 3:00pm: It seems today's High Court ruling invalidating the Victorian government's road-user tax on EVs and PHEVs has caused considerable confusion among those impacted, leading VicRoads to send the following statement to customers (including that they should continue to renew their ZLEV registration for now):

"Dear valued VicRoads customer,

The High Court has handed down its decision in relation to the Victorian zero & low emission vehicles (ZLEV) road-user charge.

Given the complexity it may some time to work through what this means for you. We thank you for your patience.

We are committed to continuing to inform ZLEV customers what the decision means for them and the next steps we will take.

Please note if you are a business customer who works with a Fleet Manager, you should advise them directly if you have any ZLEV vehicles which may be impacted.

Motorists who are due to renew their zero and low emission vehicle (ZLEV) registration should continue to do so.

We will continue to provide advice to all our customers as quickly as possible to minimise any inconvenience or confusion."

ORIGINAL ARTICLE PUBLISHED 18/10/2023 1:30pm: The High Court of Australia has declared Victoria’s electric vehicle tax unconstitutional, marking a significant win for both EV owners and environmental advocates and setting a precedent for controversial EV road-user levies in other states.

Today’s ruling comes in response to a constitutional challenge initiated in September 2021 by two Victorian electric vehicle drivers, and follows a ‘range of failures’ outlined last month by the Victorian ombudsman, who found the legislation was administered unfairly.

The landmark High Court decision on what’s been described as one of the biggest constitutional challenges in 25 years also follows the March repeal of a similar EV tax proposed for South Australia in 2020.

The controversial tax, introduced by the Victorian government in July 2021, imposed a distance-based road-user charge on owners of electric and plug-in hybrid vehicles, ranging from 2.3 to 2.8 cents for every kilometre driven – both within and outside Victoria – and the state even deregistered the vehicles of some owners who did not pay the levy.

But the tax on zero- and low-emissions vehicles (ZLEVs) was quickly labelled by EV lobbyists as the “worst electric vehicle policy in the world” and now it has been deemed by the High Court as invalid under Australian law because only the federal government has the power to impose such a tax on motorists.

David Hertzberg, senior associate at Equity Generation Lawyers, who represented the drivers at the High Court, heralded the judgement as a “landmark constitutional decision”.

The High Court’s majority verdict held that section 7(1) of the Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) (‘the ZLEV Charge Act’) was invalid as it imposed a duty of excise as per section 90 of the Constitution, a power exclusive to the Commonwealth Parliament.

The Victorian legislation required the registered operators of ZLEVs to pay a prescribed rate for each kilometre travelled on specified roads, effectively covering all public roads in Australia.

This ruling, which was supported by interventions from the Commonwealth Attorney-General and the Australian Trucking Association, overruled a previous decision from 1974 in Dickenson's Arcade Pty Ltd v Tasmania, thereby redefining what constitutes a duty of excise.

The court concluded that the ZLEV charge was indeed a tax on goods due to its close relation to the use of ZLEVs and its effect on ZLEVs as articles of commerce, including its tendency to impact the demand for ZLEVs. 

One plaintiff expressed her thrill over the judgement, highlighting that Australia has been trailing behind global counterparts in electric vehicle adoption.

She criticised the Victorian government for not only implementing the tax but also scrapping its EV subsidy – a move that will be followed by NSW from next year.

This, according to her, was a step backward at a time when the focus should be on incentivising individuals to transition to ‘greener’ vehicles. 

The second plaintiff echoed these sentiments, underlining the broader implications of the court’s decision for all Australians. He stressed that EVs play a crucial role in reducing carbon emissions and pollution, thereby improving public health.

Victoria’s ZLEV tax, he argued, served as a deterrent for potential EV buyers and penalised existing owners who are striving to reduce their emissions. 

The ruling not only invalidates Victoria’s EV tax but also sets a significant precedent that could deter other states from enacting similar legislation.

This was echoed by Electric Vehicle Council chief executive Behyad Jafari, who said the ruling would help forge better EV policy nationally. 

“The electric vehicle industry warned the Victorian Government this policy was muddleheaded years ago, and the offer has always been on the table to work with the state on a more sensible approach,” he said.

“Any road user charge scheme should be national and we now look forward to working with the federal government on sensible road funding reform, without singling out drivers who are trying to do the right thing.”

The EVC chief added that while road-user charges aren’t inherently flawed, they shouldn’t be structured to discourage EV adoption. He advocated for a national approach to road-user charges considering the economic cost of emissions.

“There is nothing inherently wrong with road user charges, but they should never be calibrated to discourage the take up of electric vehicles,” said Jafari.

“Any scheme should apply to all vehicles and should take into consideration the economic cost of emissions.

“Australia’s priority should be on boosting the transition to EVs and decarbonising our transport system. There is no need for Australia to be dependent on imported oil today.

“Road funding is also an important consideration for government, but we should approach issues in the right order.

“Allowing states to simply shake down EV owners for a bit of extra tax is a retrograde approach, and I’m very glad to see the High Court slamming the brakes on that today.”

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