Constitutional challenge to validity of state charge on e-vehicles

Articles Written by Kathryn Bertram (Partner), Annemarie Wilmore (Partner)

The High Court of Australia is currently considering whether Victorian legislation imposing a fee on the use of zero or low-emission vehicles is contrary to s 90 of the Commonwealth Constitution in Vanderstock v Victoria (HCA Case M61/2021, Vanderstock). The basis of the challenge is that the fee imposed is an excise and a tax, as it is charged at the point of consumption.

The constitutionality of state laws and whether they contravene s 90 of the Commonwealth Constitution are matters which have been heard by the High Court on many occasions. This current case, if it proceeds to judgement, will be the first time since 1997 the High Court will opine on the meaning of excise since the landmark 4:3 majority decision in Ha v New South Wales (1997) 189 CLR 465.[1]

In essence, s 90 mandates that only the Commonwealth can impose taxes and duties of excise. An excise has been held to be a tax on a step in the production or distribution of goods up to the point of receipt by the consumer. The case is of interest on many levels, including because it will engage a long-standing debate about the definition of excise and whether it should be broadened to include the point of consumption.  

In 2021, the State of Victoria enacted the Zero and Low Emission Vehicle Distance Based Charge Act 2021 (Vic). The Act imposes a charge for the use of a Zero and Low Emission Vehicle on public roads, with the quantum of the charge dependent on the length of travel on the road (ZLEV charge). 

The Plaintiff argues that the ZLEV charge is a consumption tax, which is an excise and therefore contrary to s 90. That is, the Plaintiffs are asking the High Court to broaden the definition of an excise to a charge on consumption. The Plaintiffs challenge is supported by the Commonwealth and the Australian Trucking Association. The key limbs of the challenge are:

  • The ZLEV charge has the characteristics of a tax: it is a compulsory exaction of money for public purposes;
  • The ZLEV charge is also an excise. The word ‘excise’ can include a tax imposed on the consumption of goods (in this case, the “use” of the vehicle);
  • The existing authorities establish that the purpose of s 90 was to give the Commonwealth real control over the taxation of goods; and
  • The exclusion from s 90 of taxes imposed on the consumption of goods is an anomaly and is inconsistent with the purpose of s 90.

The State of Victoria’s position is that the law is valid, and other States and Territories have intervened to support this position, arguing that:

  • The Act imposes a charge on the activity of driving a zero and low emission vehicle. This is not a tax “on goods” and is not a tax on the “use” or “consumption” of goods; and
  • Even if the ZLEV charge is a tax “on goods” it is on the use or consumption of goods, rather than on the “production, manufacture, sale or distribution of goods”. Based on previous authorities, this is not an excise.

The Vanderstock case was heard on 14 to 16 February 2023, with the judgement of the High Court reserved.

[1] Since Ha, the focus of cases such as Queanbeyan City Council v ACTEW Corporation Ltd [2011] HCA 40 has been on different aspects of s 90. In early 2020, a s 90 challenge to the constitutional validity of motor vehicle duty against the State of Victoria was settled prior to judgment.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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