Victoria’s electric vehicle tax thrown out by High Court

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The High Court of Australia has ruled Victoria’s levy on electric vehicle is unconstitutional, in a landmark judgment that means Treasurer Tim Pallas will have to wind back the tax and other states will have to abandon similar plans to tax EV drivers.

The EV tax had been described as the “worst electric vehicle policy in the world” by car manufacturers, industry groups and environmentalists, and the Victorian Ombudsman recently found the legislation was being unfairly administered.

Kathleen Davies is one of the plaintiffs who successfully took the Victorian government to court over the electric vehicle tax.Credit: Jason South

The decision was greeted with joy by plaintiffs Chris Vanderstock and Kathleen Davies, who launched the High Court legal challenge against the state of Victoria, arguing it lacked the constitutional power to tax drivers with a road user charge.

The plaintiffs were represented by Equity Generation Lawyers, the same legal firm that acted for eight teenagers in a landmark climate court action against former federal Environment Minister Sussan Ley.

“Australia is lagging behind the rest of the world on electric vehicle uptake. 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,” said David Hertzberg, a senior associate at Equity Generation Lawyers.

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

“The Victorian government has been moving in the wrong direction – it went out alone in taxing electric vehicles, and recently it scrapped its electric vehicle subsidy.”

Chris Vanderstock, who owns two electric vehicles and commutes to his job as a nurse manager, said it was a great outcome for both Victorian electric vehicle drivers and all Australians.

“I’m so happy, I’m ecstatic. Just relieved that the judgment has been in our favour,” he said. “This now paves the way for coherent, rational, fair policy because what Victoria had done was unfair and ignored the benefits of EVs.”

“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.”

The case was a response to Pallas’s decision to introduce a controversial levy in 2021 that charged electric vehicle drivers between 2.2 and 2.6 cents for every kilometre they drove. NSW and Western Australia plan to impose their own EV road-user charges from 2027.

The two complainants successfully claimed that states did not have the power to charge these taxes, saying the constitution divides powers between the states and the Commonwealth, and gives the Commonwealth the exclusive power to levy taxes of this kind.

They said the Victorian levy is a tax on the consumption of electric vehicles, and the power to levy that tax only rests with the Commonwealth, a claim upheld by the High Court.

The Victorian government had claimed the tax would make road charging fairer for all motorists because electric vehicle drivers did not pay fuel excise. Mr Pallas said the charge would establish the necessary tax infrastructure as electric vehicle uptake grew towards an anticipated 26 per cent of all cars in Australia by 2030.

About $30 million had been expected to be raised by the new charge, over four years.

More to come

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