The High Court has ruled that Victoria’s EV road user charge is invalid because the states and territories don’t have the power to impose excises under the Constitution.

The decision is being considered by other states, including NSW which had been planning a similar charge and says the judgement has implications for the transition to net zero.

The ruling, handed down on October 18, came in response to a challenge to Victoria’s controversial Zero and Low Emission Vehicle (ZLEV) Distance-Based Charge launched by two EV drivers after it was introduced by the state government.

The legislation applied to electric and plug-in hybrid electric vehicles, which aren’t subject to the Commonwealth fuel excise that goes towards road maintenance.

Victoria introduced the ZLEV legislation in 2021 to make sure the drivers of the state’s 19,2000 registered EVs were paying their share, charging them for each kilometre travelled on public roads, including outside Victoria.

But the court found that the Victorian charge amounts to an excise, which only the Commonwealth has the constitutional authority to levy.

Implications for tax mix

Treasurer Jim Chalmers says the decision has implications for the Commonwealth-state tax mix and the federal government will work through the issues in a ‘considered and methodical way’.

“We acknowledge the decision of the High Court. These decisions and these issues are complex so we’ll take the time to consider them, we’ll seek all of the relevant advice, and we’ll have more to say in due course,” he told reporters last Thursday.

NSW says it is also studying the constitutional implication for a planned road user charge in NSW.

NSW was considering a charge that would apply to EVs from July 2027, or when EVs make up 30 per cent of new vehicle sales, with the government saying it would ensure all drivers are paying for their share of road use regardless of the type of vehicle they drive.

Treasurer Daniel Mookhey said the ruling could see drivers of non-electric vehicles being the only road users to make a contribution to road maintenance, raising significant questions about the fairness of existing tax arrangements during the transition to net zero.

“The NSW Government will begin discussions with the other states and territories on the matter,” he said.

“The transition to net zero is only possible if the rules are applied fairly and are seen to be fair.”

The ruling comes after Victoria’s Ombudsman last September found a litany of failures in the state government’s implementation of the ZLEV road user charge, comparing it to Robodebt.