Federal Government challenges Victoria’s EV tax in High Court – report

The Federal Government has formally backed a legal bid seeking to eliminate a levy imposed on electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs) registered in Victoria.

According to a report in The Age, federal Attorney-General Mark Dreyfus last week filed an intervention in the High Court, supporting a case challenging the state’s electrified vehicle levy.

From 1 July 2021, motorists in Victoria driving EVs and PHEVs were required to pay 2.5 cents and 2.0 cents respectively for every kilometre driven – increasing to 2.6 and 2.1 cents from 1 July 2022.

While industry bodies slammed the decision at the time, the Victoria Government said the levy was designed to recuperate lost fuel excise revenue from battery-powered cars, some of which goes towards road infrastructure projects in the state.

Traditional hybrid and mild-hybrid cars are exempt from the levy, but PHEV owners pay both the distance-based state levy as well as the 44.2 cents-per-litre federal fuel excise – which was temporarily discounted by half to help ease rising fuel prices back in March.

Despite many in the industry criticising the distance-based levy as disincentivising the adoption of zero- and low-emissions vehicles, the Victorian Government’s decision to introduce the levy may have been a political and legal tactic.

Its introduction could create a precedent that would help ensure all money collected via this method goes directly into the state’s coffers, rather than being funnelled to – and subsequently distributed by – the Federal Government.

Approximately $12 billion from the fuel excise is collected by the Commonwealth annually, with that figure expected to decline as motorists make the shift into battery-electric vehicles in the coming years.

The High Court challenge was launched against the Victorian Government in September 2021 by two EV owners, who claimed the state did not have the constitutional power to impose the levy, with the Federal Government now formally supporting the legal campaign.

Despite the federal Attorney-General filing an intervention in support of the case, the report says Attorneys-General from all other states have intervened to support Victoria’s defence – with both NSW and Western Australia already announcing plans to introduce a road-user charge in the future.