Victoria’s highly controversial electric vehicles tax has been struck down by the High Court in a landmark decision that will likely stall plans to introduce similar policies around the country.
The Victorian government introduced a charge for electric, hydrogen and plug-in hybrid vehicle owners for every kilometre they travelled.
The tax was designed to mirror the Commonwealth’s fuel excise, which is imposed on fuel-powered vehicles.
Under the policy, drivers of electric and hydrogen vehicles were charged 2.8c for each kilometre they travelled, while plug-in hybrid owners were charged 2.3c.
Two electric car owners, Kathleen Davies and Christopher Vanderstock, challenged the policy in the High Court, arguing that it was an illegal “tax grab” as it was an “excise”, something which only the Commonwealth can impose.
On Wednesday, the High Court agreed, finding that the Victorian EVs tax was “unconstitutional”
It was a contested judgement, with a 4-3 majority reached in the end.
Tax vs excise
The Victorian government had argued that the EV tax wasn't an excise, but a tax on activity that it was entitled to levy as a state government.
This position was backed by every other state and territory government.
But the High Court in its majority ruling found that it was not a “licence or permit fee” but rather a tax on the use of an electric vehicle.
It labelled the Victorian government’s argument “unpersuasive” and “debunked” its interpretation of what an excise is.
Davies said she was “thrilled” with the result.
“It is to me almost a common sense outcome – we no longer have an active disincentive to driving EVs,” Davies said.
“When the tax came in in 2021, I thought ‘oh you are joking, how can you penalise people for driving an electric vehicle?’ I was very angry so I took [the case] on. It was the wrong direction to go.”
Vanderstock, said he has paid $1,300 since the tax was introduced.
He said the court decision was a victory over “ad hoc, piecemeal policy which undermined our collective efforts to reduce emissions from transport”.
“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,” Vanderstock said.
“What Victoria has done to Victorian motorists to date has been very unfair, inequitable and it ignores the benefit of electric vehicles.
“Charging a select group of drivers was grossly unfair and made all our roads a toll road effectively.”
Where to for state governments?
The Victorian government has been directed to pay the court costs, and may now have to repay the money it has received from the EV tax which has now been in place for more than two years.
New South Wales and Western Australia were planning to introduce similar plans in the coming years, but the High Court’s decision now makes this unlikely.
In a statement, NSW Treasurer Daniel Mookhey said the state government is now studying the decision for its implication on the planned road user charge in that state.
“Today’s ruling could see drivers of non-electric vehicles as the only road users making a contribution to road maintenance,” Mookhey said.
“This raises significant questions about the fairness of existing tax arrangements during the transition to net zero.
“The NSW government will also begin discussions with the other states and territories on the matter.”
The EV taxes have been introduced as revenue from the fuel excise for states and territories has decreased and state governments are looking to recoup some of this from owners of net-zero emissions vehicles.
With the High Court’s decision, it is now unlikely how electric car owners will be charged for the maintenance of the roads they are using.
Davies said she is not against the idea of a tax in general, but said Victoria’s levy was “ad hoc”.
“Australia is lagging behind the rest of the world on electric vehicle uptake,” she said.
“Now is not the time to be taxing electric vehicles – it’s the time to be doing everything we can to encourage people to make the switch to cleaner cars.”
The federal government recently revealed plans to finally introduce a fuel efficiency standard, which will set a limit on the total average emissions allowable across all cars sold in Australia, aiming to incentivise the development and sale of electric vehicles.