High Court Strikes Down State Tax on EVs in Landmark Ruling

The contentious 4-3 decision concluded Victoria’s ZLEV road user charge was invalid under the Constitution.

Electrical vehicle chargers in Irvine, Calif., on July 12, 2023. John Fredricks/The Epoch Times

The High Court of Australia has struck down the Victorian government’s tax on drivers of electric vehicles (EV) and plug-in hybrid vehicles.

Under the state government’s Zero and Low Emission Vehicles (ZLEV) road user charge, drivers of these vehicles were taxed according to every kilometre they drove.

The government reasoned that all drivers of traditional vehicles paid fuel excise, through the purchase of petrol and diesel, to fund the maintenance and development of roads.

“ZLEV registered operators pay little or no fuel excise because these vehicles are primarily powered by electric or alternative fuel sources. The ZLEV road user charge means that all road users pay their fair share,” the government states on its website.

However, in a 4-3 split, the High Court on Oct. 18 ruled the tax unlawful, concluding that it fell under section 90 of the Constitution, which states that the power to place duties of customs and excise on the production of goods is exclusive to the Commonwealth.

Further, while the ZLEV is called a “user charge,” the majority concluded that it effectively imposed a “duty of excise,” and therefore came under section 90 invalidating the state tax.

“In this case, the ZLEV charge is a tax, not a fee for service. It is not a licence or permit fee for an activity properly the subject of a regulatory scheme. Rather, the ZLEV charge is a tax on the use of ZLEVs,” the court judgement said.

“The ZLEV charge, accordingly, is an excise.”

This was the first time in the 21st century that the scope of section 90 in the Constitution has been examined by the High Court.

Lawyer David Hertzberg said it was a “landmark constitutional decision.”

“Today’s judgment means that Victoria’s electric vehicle tax is invalid. It also sets a precedent which will likely prevent other states from implementing similar legislation,” he said.

K&L Gates partner Matthew Cridland highlighted the ramifications of the ruling, warning that at the extreme, it could have stripped the ability of state governments to impose taxes on any goods.

“That could have significant implications on any stamp duty that might apply to transfers of business assets, or infrastructure assets that are affixed to land,” he told the Australian Financial Review.

The case was launched by Victorians Chris Vanderstock and Kath Davies shortly after the tax was introduced on July 1, 2021.

They welcomed the court’s ruling on what has been dubbed the “worst EV policy in the world.”

“This is a great outcome not only for Victorian electric vehicle drivers, but for all Australians,” Mr. Vanderstock said.

“Electric vehicles are fun to drive, but they also help decrease carbon emissions, reduce pollution, and improve our health.

“We believe that Victoria’s electric vehicle tax discouraged people from buying EVs, and punished existing EV owners who are trying to do the right thing. It was an ad hoc, piecemeal policy which undermined our collective efforts to reduce emissions from transport.”

No Federal EV User Road Charge In Sight

ZLEV charged drivers of EVs up to 2.8 cents per kilometre and drivers of plug-in hybrids up to 2.3 cents per kilometre.

Meanwhile, the federal fuel excise currently charges drivers 48.8 cents for every litre of fuel bought.

During an address to the National Press Club in August, Federal Treasurer Jim Chalmers suggested that the government would look to establish a tax for EV drivers in the future but that its current priorities were elsewhere.

“Our focus, for the time being, is a couple of strategies that [Minister for Transport] Catherine King and [Minister for Climate Change and Energy] Chris Bowen are consulting on and working up when it comes to the broader environment and infrastructure for electric vehicles,” he said.

“No doubt at some point, probably relatively soon, by which I mean in the next few years, a government—our government or our successor—will turn our mind to it.”

The ruling comes after the Victorian Ombudsman Deborah Glass found that the charge was administered “unfairly.”

She revealed that in one instance, a driver of a plug-in hybrid was charged the ZLEV tax after travelling thousands of kilometres on fuel, due to the lack of charging stations in remote Australia.

“Despite the driver paying fuel excise on those kilometres, the department did not waive the additional hundreds of dollars payable under the ZLEV charge,” Ms. Glass said.