Legal development

Australian High Court test case set to determine the validity of Victorias electric vehicle tax

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    What you need to know

    • In a landmark case in the High Court of Australia that will have implications for the future of electric and hybrid vehicles in Australia, two electric and hybrid vehicle owners have challenged the constitutional validity of Victoria's Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) (ZLEV Act).
    • The outcome of the case of Vanderstock & Anor v The State of Victoria will determine how electric and hybrid vehicles are taxed in Australia.
    • The case was heard by the High Court over three days, concluding on 16 February 2023.  
    • Reflecting the importance of the test case, the Commonwealth intervened in support of the individual plaintiffs and each of the other States and Territories intervened in support of the State of Victoria's position.  The Australian Trucking Association sought leave to be heard in written submissions only as an amicus curiae.
    • The case concerns the requirement in section 7(1) of the Victorian Act to "pay a charge for the use of the ZLEV on specified roads” (ZLEV charge).
    • The plaintiffs' case is that the ZLEV charge is invalid on the ground that it imposes a "duty of excise" within the meaning of section 90 of the Constitution and is therefore beyond the power of the Victorian Parliament.
    • If the plaintiffs' case is successful, other States will likely be prohibited from imposing any electric vehicle charges equivalent to Victoria's ZLEV charge.  
    • The test case impacts every State and Territory in Australia and the High Court's decision will be much anticipated by all levels of Government, the electric vehicle industry and electric vehicle owners across the nation.

    What you need to do

    • Watch this space – The High Court has directed the Commonwealth to provide further submissions on the operation of section 90 of the Constitution by 17 March 2023, and the State of Victoria to provide a reply one month later.
    • Look out for further updates and Government and industry responses when the High Court hands down its decision, which is not expected to be before mid-2023.  

    The plaintiffs' case and the Commonwealth's position

    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's position

    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.

    Potential implications of the case

    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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