Victoria’s electric vehicle tax faces high court challenge

Two electric vehicle drivers have launched a high court challenge to Victoria’s electric vehicle tax, arguing the levy is unconstitutional.

The challenge was filed on Thursday by Equity Generation Lawyers, the legal firm that represented eight teenagers in a federal court case that found the federal environment minister, Sussan Ley, had a duty to protect young people from the climate crisis.

The case will argue that the Victorian government does not have the constitutional power to impose the tax.

In July this year, the Victorian government introduced a new tax that charges electric vehicle drivers between 2 cents and 2.5 cents for every kilometre they drive.

Drivers of electric vehicles are required to submit annual odometer readings to state authorities from which an annual charge is calculated.

In April this year, before the policy took effect, a coalition of car manufacturers, industry groups, infrastructure companies and environmentalists labelled it the “worst electric vehicle policy in the world”.

They warned it would make it less affordable for drivers to switch to zero emissions vehicles at a time when the market was not yet firmly established in Australia.

The Victorian government has defended the tax as a way of ensuring electric vehicle drivers are making a contribution towards road use when they are not paying fuel excise.

Melbourne mother and engineering consultant Kathleen Davies, and Chris Vanderstock, a father and nurse manager also based in Melbourne, are the two EV drivers who have launched the case.

Davies bought her first EV in 2012 as part of a larger decision to move away from fossil fuel use that also involved retrofitting the family home and restructuring the family’s finances.

She bought her second EV, a BMW i3 with a range extender, in 2017.

She said the EV tax was flawed and impractical and had been introduced at a time when decarbonisation was urgent.

“It’s bad policy because we should be encouraging people to move to electric vehicles, not discouraging them,” Davies said.

“It’s a counter-productive direction. I’ve done a lot over the last 15 years to get myself away from fossil fuels and I feel I’ve been penalised for what I’ve done.”

The legal team will argue that the Victorian government does not have the constitutional power to impose the charge because the constitution granted the commonwealth power to levy taxes.

Lawyer Jack McLean said there were some state-based taxes, for example on land.

McLean said the fuel excise was a commonwealth tax and funds raised from it went into consolidated revenue and had not gone directly to funding roads for 70 years.

“We’re going to be arguing this is a tax on consumption – the consumption of electric vehicles – and it’s therefore similar to the GST which is a commonwealth tax,” he said.

“It’s clear that the commonwealth has the power to impose a tax on consumption, what’s not clear is if the state has that power.”

Anne Twomey, a professor of constitutional law at the University of Sydney, said under section 90 of the constitution state governments could not impose an excise.

But it had been previously argued and accepted by courts that a tax on the use of goods already owned by the consumer was different to an excise which taxes the production, manufacture or sale of goods.

“It might well be that the court takes a different view,” Twomey said.

“But they would have to be pushing a barrow uphill to convince the court to reject previous authorities.”

Vanderstock bought his first electric car in December and was prompted to make the switch in part because electric transport was better for human health.

He said the new tax was poorly timed when electric vehicles still accounted for less than 2% of new vehicle sales.

“This tax is going to be a disincentive for people – cars are already expensive here and particularly electric vehicles because they’re new technology,”.

“It’s the wrong timing and the wrong thing to be doing for the health of the community.”

The Victorian treasurer, Tim Pallas, defended the policy on Thursday stating: “We’re investing in the future of electric vehicles and ensuring everyone pays their fair share to building and maintaining our roads.”

“This reform will deliver broad benefits to the public in the long-term, including less congestion, reduced road maintenance expenditure, less urban sprawl and further transport mode shift,” he said in a statement.

“Our comprehensive $100m investment – made possible by the road user charge – will ensure a faster and smoother transition to zero emissions vehicles in Victoria.”

Victoria is the first state to legislate a tax on electric vehicles. NSW and South Australia plan to introduce their own taxes that would commence from 2027.

Transport emissions are Australia’s third-largest source of carbon pollution, accounting for about 17.5% of Australia’s annual emissions.


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