Australia's High Court Nullifies Victoria's Electric Vehicle Tax: What It Means for Motorists

The High Court of Australia has delivered a pivotal ruling, declaring Victoria's distance-based tax on electric and plug-in hybrid vehicles unconstitutional. This decision, one of the most significant constitutional verdicts in recent decades, has determined that only the Federal Government holds the authority to levy such a tax.

In the case of Vanderstock & Anor v State of Victoria, the High Court found the Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) to be invalid under Section 90 of the Constitution. This section exclusively empowers the Commonwealth Parliament to "impose duties of customs and excise". The Court's ruling highlighted that the ZLEV charge is "a tax on goods" due to its close relation to the use of ZLEVs and its potential impact on the demand for these vehicles.

Victoria's road-user charge for Zero- and Low-Emissions Vehicles (ZLEV) was introduced on 1 July 2021. The state imposed a 2.8 cent charge per kilometre for electric or hydrogen vehicles and 2.3 cents for plug-in hybrids. This tax meant that plug-in hybrid owners in Victoria were doubly taxed: they paid both the Federal Government's fuel excise and the state's road-user tax.

The High Court's judgement emphasized the exclusivity of the Commonwealth Parliament's power to impose duties of excise. This ensures that uniform laws of trade or commerce or taxation, which the Commonwealth Parliament enacts or might choose to enact, cannot be distorted by State or Territory taxes on ZLEVs or other goods.

The Commonwealth Attorney-General and the Australian Trucking Association supported the plaintiffs, Christopher Vanderstock and Kathleen Davies, who both own ZLEVs. In contrast, the Attorneys-General of every other Australian state, as well as those of the Australian Capital Territory and the Northern Territory, backed Victoria.

Behyad Jafari, CEO of the Electric Vehicle Council, reiterated the importance of a national approach to road user charges. He emphasized that such charges should not deter the adoption of electric vehicles and called for collaboration with the federal government on sensible road funding reform.

Victoria's approach to electric vehicle taxation has faced criticism from various stakeholders, including car manufacturers, industry groups, and the Victorian Ombudsman, Deborah Glass. The Ombudsman's report highlighted issues with the implementation of the charge, including an unreasonable lack of policy guidance and inflexible handling of complaints.