Landmark ruling finds Victoria's EV tax ‘unconstitutional’

The ruling will force the Victorian government to wind back its tax which has been described as the ‘worst electric vehicle policy in the world’.

The Victorian government’s controversial electric vehicle tax has been struck down by the High Court. Picture: istock

Australian motoring organisations say the federal government has been given a major tax reform opportunity, as the opposition called on the Albanese government to immediately convene a meeting of state governments to discuss the future of petrol tax.

The calls come after Victoria’s controversial electric vehicle tax was struck down by the High Court, preventing other states from introducing road user charges and placing mounting pressure on Anthony Albanese to ensure viability of the nation’s roads into the future.

With fuel excise revenue projected to decline amid a rise in electric vehicle usage, Australian Automobile Association managing director Michael Bradley said Australians needed a nationally consistent model for road funding into the future.

“The High Court decision gives the Australian government a major tax reform opportunity,” Mr Bradley said.

“Electric and other zero-emissions vehicles should urgently be brought into the road use tax system,” he added. “The federal government needs to work with states and territories to develop a nationally consistent approach.”

Opposition transport spokeswoman Bridget McKenzie said the High Court’s ruling meant the responsibility for collecting road user charges fell squarely on the commonwealth.

Senator McKenzie called on the Albanese government to immediately convene a meeting of state and territory governments to discuss the future of petrol tax and road user charges in the wake of the High Court ruling.

“(Transport Minister) Catherine King can’t hide behind emissions standards or state governments but has to show leadership on how we are going to pay for our roads in a low-emissions transport sector future, instead of explicitly ruling it out of her considerations,” Senator McKenzie told The Australian.

The High Court on Wednesday ruled the Victorian government’s tax was unconstitutional, forcing the state government to wind back its levy – which had been described as the “worst electric vehicle policy in the world” by industry groups, manufacturers and environmental lobbies.

Under the tax – which was expected to raise about $30m over four years – motorists with electric vehicles were charged at a rate of nearly 3c per kilometre travelled, with drivers required to ­submit a photograph of their odometer once a year.

Electric car owners Chris Vanderstock and Kathleen Davies successfully argued the tax was illegal because it was an excise, which only the commonwealth had the ability to impose. The court was divided in its ruling 4-3.

A spokeswoman for Jim Chalmers said Labor was seeking advice on the ruling and would work with Victoria and other states in relation to EV policy.

“We’re focused on getting more electric vehicles into the fleet and we have a plan to deliver that, including incentivising the purchase of electric vehicles through exemptions from fringe benefits tax and import tariffs,” the spokeswoman said.

The Albanese government is expected to release national fuel efficiency standards before the end of the year that will impose a pollutants cap on the average emissions from a fleet of cars sold by a manufacturer to encourage them to sell more EVs

Ms King told parliament Labor’s new standards would improve access to cleaner cars while assisting Australia to reduce its carbon emissions.

Australia is the last developed economy after Russia which does not impose caps on car emissions, with passenger cars currently making up almost 10 per cent of national emissions.

Electric vehicle take-up in Australia has also been lagging behind other countries, with just 4 per cent of new cars sold compared to 9 per cent globally.

Greens Leader Adam Bandt on Wednesday called on Labor to rule out introducing any new taxes on EVs following the High Court ruling, saying governments needed to be making electric cars cheaper not more expensive.

The Electric Vehicle Council described the ruling as a historic win for drivers and the environment, and that the federal government must focus on “sensible” road funding reform.

“The electric vehicle industry warned the Victorian government this policy was muddle-headed years ago, and the offer has always been on the table to work with the state on a more ­sensible approach,” EVC chief executive Behyad Jafari said.

“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.”

The Australia Institute said Australian motorists should not be penalised for switching to electric vehicles through taxes. The think tank’s South Australian ­director, Noah Schultz-Byard, said pressure was mounting on the federal government to adopt fuel efficiency standards.

“Australia is a long way behind the rest of the world when it comes to EV adoption, and with the scrapping of these state-based policies attention will now turn to the federal government,” he said.

“Tinkering at the edges with modest reforms will not get us to where we need to be when it comes to reducing carbon pollution from the transport sector.”

A Victorian government spokesman said the state was disappointed with the outcome but accepted the court’s ruling.