Victorian Zero & Low Emission Vehicles charges ruled duty of excise and invalid: High Court decision

On 18 October 2023, the High Court of Australia delivered a lengthy and significant judgment in the excise matter of Vanderstock & Anor v Victoria. This case concerned whether a Victoria Government charge for the use of Zero and Low Emission Vehicles (based on a distance travelled charge) was, in substance, an excise. Section 90 of the Constitution provides the Commonwealth with exclusive power to impose such an excise, so the question that needed to be answered was ‘what is an excise?’

By a narrow four to three majority (with Justices Gordon, Edelman, and Steward dissenting), the Court departed from Dickenson's Arcade Pty Ltd v Tasmania (1974) - which had previously established that a tax on the consumption of goods did not constitute a duty of excise - and ruled that the Victorian Zero and Low Emission Vehicles charges were an excise.

Ultimately, the Court held that Section 7(1) of the Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) was invalid. The majority concluded that a tax on the use or consumption of goods increases the price of those goods to consumers. Such a tax operates in the same way as a sales tax in terms of the manner in which it depresses demand for these goods in the market.

BDO Comment

The dissenting views of Edelman and Steward JJ raise interesting questions concerning several other types of taxes including payroll tax, land tax, gaming taxes and other business taxes as to whether they are in substance, state-based excise duties and therefore unlawful. It’s unlikely this area of the law will be considered ‘settled’ for some time.

Should you have any questions regarding the content of this article, please contact your BDO tax adviser for further guidance.