Australian High Court test case set to determine the validity of Victorias electric vehicle tax
23 February 2023
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23 February 2023
The plaintiffs in the case are Christopher Vanderstock and Kathleen Davies, respective owners of electric and hybrid vehicles.
From 1 July 2021, the plaintiffs and other Victorian electric vehicle drivers are required by the ZLEV Act to maintain a log of the use of their vehicles and pay the annual ZLEV charge to the Victorian Government based on the number of kilometres driven on specified roads in the preceding 12 months.
The plaintiffs submitted that the ZLEV charge is invalid and unconstitutional, as it is properly characterised as an "excise". The power to impose an excise remains the exclusive power of the Commonwealth under section 90 of the Constitution. The plaintiffs submitted that the State of Victoria therefore did not have the constitutional power to impose the ZLEV charge.
The plaintiffs' case is founded on the proposition that the ZLEV charge is a tax on the "consumption" of goods (namely, ZLEVs) and that such a tax is a duty of excise.
In support of the plaintiffs' case, the Commonwealth submitted that the ZLEV Act imposes a tax on goods (specifically, on ZLEVs). The ZLEV charge is calculated by reference to the consumer's usage of a ZLEV. On that basis, the Commonwealth submitted, the ZLEV charge imposes an excise and is therefore invalid.
The State of Victoria submitted that the ZLEV charge is a tax on the "activity" of driving a ZLEV on a specified road rather than a consumption of goods, and therefore does not impose a duty of excise. On that basis, the State of Victoria submitted that the ZLEV charge is a valid tax.
The other States and Territories supported the State of Victoria's position.
The case comes at a time when the States, Territories and the Commonwealth are working to facilitate an increase in electric vehicles on Australian roads and develop and maintain the infrastructure and systems required to support them.
In late 2022 the Commonwealth government released the National Electric Vehicle Strategy consultation paper for public comment. The submissions in response have now been published (access them here). The broad consultation sought views on proposed national goals, objectives and actions for the National Electric Vehicle Strategy to ensure an orderly and integrated transition to transport electrification in Australia.
The States and Territories have been considering the potential for road user charges for electric vehicles for some time. NSW and Western Australia have each indicated an intention to follow Victoria's lead and impose a road user charge on electric vehicles.
South Australia, however, passed legislation in early February 2023 to repeal its equivalent of the ZLEV charge in response to community feedback that the tax would have reduced uptake of electric vehicles (the Motor Vehicles (Electric Vehicle Levy) Amendment Repeal Bill 2022 (SA) has passed both Houses of Parliament and is awaiting Assent).
If the plaintiffs' case is successful and the ZLEV charge is determined to be invalid, other States will likely be prohibited from imposing any charges equivalent to Victoria's ZLEV charge.
Ultimately, the outcome of the case will determine how electric vehicles can be taxed in Australia and whether it is the Commonwealth or the States and Territories that can collect revenue from the use of roads.
Either way, the journey of electric vehicles in Australia promises to be an interesting ride.
Authors: Angus Foley, Partner; Sarah Ross-Smith, Partner; Claire Woodland, Senior Associate and Brianna Woodhead, Lawyer.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.
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