The High Court of Australia has deemed Victoria’s road user charge as an excise and is therefore invalid under the Constitution.
In a majority ruling in Vanderstock & Anor v State of Victoria, the High Court found the Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) is invalid under Section 90 of the Constitution as it imposes a duty of excise.
Section 90 says only the Commonwealth Parliament, not the states and territories, can “impose duties of customs and excise”.
The Court overruled a 1974 decision (Dickenson’s Arcade Pty Ltd v Tasmania) on the nature of an excise, arguing the ZLEV charge is “a tax on goods because there is a close relation between the tax and the use of ZLEVs, and the tax affects ZLEVs as articles of commerce, including because of its tendency to affect demand for ZLEVs”.
Section 7 (1) of the ZLEV Charge Act requires owners of electric, plug-in hybrid and hydrogen fuel-cell vehicles registered in Victoria to pay a charge for the use of their vehicle on “specified roads”, which covers all public roads in Australia.
The Court has ruled Victoria must pay the costs of the proceeding.
“Any tax on ZLEVs or any other goods – whether imposed at the stage of their importation into Australia or production or manufacture in Australia or at any subsequent stage in their distribution, sale, ownership, control, use, resale, reuse or destruction in Australia or export from Australia – can be imposed only by uniform national legislation,” reads the judgment.
“The exclusivity of the power of the Commonwealth Parliament to impose duties of excise ensures that such uniform laws of trade or commerce or taxation as the Commonwealth Parliament has chosen to enact (in the form of the exemption from fringe benefits tax and the removal of customs duty) or might afterwards choose to enact for the purpose of stimulating the demand for ZLEVs… cannot be distorted or impeded by State or Territory taxes on ZLEVs or on other goods.
“And if the projected diminution in revenue from the existing fuel excise attributable to the increasing take-up of ZLEVs is to be offset through the introduction of some other tax on ZLEVs or on other goods, that new tax on goods can only be imposed by the Commonwealth Parliament,” the Justices concluded.
The Commonwealth Attorney-General and the Australian Trucking Association intervened in support of the plaintiffs, Christopher Vanderstock and Kathleen Davies, who both own ZLEVs.
Intervening in support of Victoria were the Attorneys-General of every other Australian state, as well as those of the Australian Capital Territory and the Northern Territory.
Victoria introduced its road-user charge on July 1, 2021, and it currently sits at 2.8c/km for electric vehicles (EVs) and 2.3c/km for plug-in hybrids (PHEVs).
Drivers must provide photographic evidence of their odometer within 14 days of being contacted by VicRoads, to determine the kilometres travelled at the start and end of each registration period – including travel undertaken outside of Victoria.
“There is nothing inherently wrong with road user charges, but they should never be calibrated to discourage the take up of electric vehicles,” said Behyad Jafari, CEO the Electric Vehicle Council which lobbies for EVs in Australia.
“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.
“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.
“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.”
Victoria isn’t the only state to have proposed a road-user charge. The New South Wales and Western Australian governments have previously pledged to roll out similar taxes around 2027, while South Australia pledged to do the same but reversed course following a change in government.
The Victorian Act has been criticised not only by ZLEV owners like the plaintiffs in Vanderstock, however, but also car manufacturers, industry groups and, most recently, the Victorian Ombudsman, Deborah Glass.
The Ombudsman’s criticisms were levelled not at the constitutionality of the charge, which she said was best left to the High Court to weigh, but at its implementation.
“We found an unreasonable lack of policy guidance to those administering the legislation, inflexible handling of complaints, and an unwillingness to exercise discretion,” said the Ombudsman in her report.
“It is also wrong to charge penalties not provided for in legislation, and the money collected under this ‘penalty’ should be repaid.”
Ms Glass has tabled her investigation into the Department of Transport and Planning’s implementation of the charge. At the time of the investigation, the Department had received more than 180 complaints.
You can view the Ombudsman’s full report here.
The report also calls out the ZLEV Act’s treatment of PHEV owners, observing some PHEV owners may travel thousands of kilometres on fuel in their vehicles in remote parts of Australia with no charging stations and be stung with a road-user charge even though they’ve already paid the Commonwealth fuel excise for that mileage.
While Victoria did employ $3000 subsidies to help spur EV uptake, it scrapped this program earlier this year.
More to come…
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