Uncertainty continues to develop in Australia's EV registration charge landscape

Amorkor Amartey, Peter Holcombe Henley
09 Jun 2022
Time to read: 4 minutes

As Western Australia joins the list of States with EV registration charges, the new South Australian government introduces a Bill to repeal that State’s EV levy and two Victorian EV owners continue their constitutional challenge against the Victorian ZLEV Act in the High Court.

The progress of legislated road user charges for owners of zero and low emission vehicles (ZLEVs) in Australia continues down a bumpy road.

States, regardless of the political party in power, continue to adopt differing approaches to balancing policies that, on the one hand, encourage ZLEV take-up, and on the other, maintain State revenues. Meanwhile, the constitutionality of Victoria's ZLEV road user charge is being challenged in the High Court of Australia.

South Australia to reverse position on ZLEV road user charge

With a new Labor government elected in April 2022, South Australia is set to U-turn and repeal the State's Motor Vehicles (Electric Vehicle Levy) Amendment Act 2021 (SA EV Levy Act).

The SA EV Levy Act was only passed by SA's parliament in October 2021 after a 12-month delay and after obtaining cross-bench support. It is scheduled to commence in July 2027, or when the State's battery-powered EV sales exceed 30% of total vehicle sales per annum, whichever is first to occur. 

On 18 May 2022, the Motor Vehicles (Electric Vehicle Levy) Amendment Repeal Bill 2022 was introduced to the House of Assembly. Clearly the new Government is not intending to waste time in following through on its election promise.

Western Australia introduces ZLEV road user charge

In contrast, the Western Australian Government has announced plans to introduce a road user charge as part of a $60 million package to accelerate ZLEV use. The package includes rebates for the purchase of electric and hydrogen vehicles and investment in ZLEV infrastructure.

WA will introduce a distance-based road user charge for zero and low emission light vehicles from 1 July 2027. Consistent with the other States, drivers of EVs and hydrogen vehicles will be charged a base rate of 2.5 cents per kilometre, with a rate of two cents per kilometre applying to plug-in hybrid electric vehicles. Both rates will be indexed to the Consumer Price Index, a more significant consideration than was the case when Victoria designed its charging framework in early 2021.

The package represents a substantial policy development by the WA Government, noting that road user charges were not originally foreshadowed in WA's 2020 Electric Vehicle Strategy.

The WA Government’s approach of coupling the introduction of the charge with substantial vehicle purchase rebates and programs to invest in further EV infrastructure, such as charging stations, demonstrates learnings from the experiences of other States, and will go some way to ensuring the ZLEV industry and user groups do not mobilise to resist the charge on the basis that it disincentivises the transition to low-emissions vehicle fleets.

High Court Case — Vanderstock et al v Victoria

The constitutional challenge to the Victorian Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) (ZLEV Act) continues in the High Court. The plaintiffs in Vanderstock & Anor v. The State of Victoria (Vanderstock) are arguing that the ZLEV charge imposes an excise duty which, under the Commonwealth Constitution, can only be imposed by the Commonwealth Government, not the States. We outlined the background to the case in an earlier Insight article.

Another four States (SA, Tasmania, WA and Qld) have now applied to the High Court to intervene in the proceedings to defend the constitutionality of the ZLEV Act. The intervention of these States (not all of which have introduced or signalled an intention to introduce similar ZLEV road user charges) reflects the Australia-wide interest in the outcome of this case, as all States and Territories, and indeed the Commonwealth, grapple with the challenge of designing effective ZLEV policies whilst addressing the ongoing cost of building and maintaining road networks.

The legal reality is that funds raised from road-related revenue sources are not hypothecated to being spent on the road network: recent research by the Australian Automobile Association suggests that on average, just 53% of the Commonwealth tax revenue raised by the federal fuel excise is used to contribute to maintenance or development of road infrastructure.

Under a draft minute of Orders dated 1 June 2022, the parties jointly proposed that a special case filed on 12 May 2022 (not publicly available) will be progressed, with the plaintiffs to file a special case book by 14 June 2022, and subsequent submissions including those by interveners to be completed by early October 2022.

What's down the road for electric vehicles in Australia?

The recent policy developments in SA and WA demonstrate that debate over ZLEV road user charges will be an enduring feature of the Australian ZLEV landscape for the coming few years. With long pre-commencement periods, and many State elections occurring in the interim, more changes may eventuate, as new vehicle technologies — particularly around hydrogen fuel — may require States to further refine their road user charge models and enforcement technologies.

The recently-elected federal Labor Government's position on promoting a nationally consistent approach to ZLEV road user charges in Australia is similar to the outgoing Coalition stance. Labor's electric car policy includes a discount, tax exemptions and the promise to develop an Australia wide National Electric Vehicle Strategy which addresses policy settings and policy implications of a declining fuel excise. With the Greens and 'teal' independents having a stronger presence in the House and the Senate, a clear national strategy on ZLEVs may need to be a higher order priority.

However, to date the Greens' policy position has been to scrap all state-based EV taxes. In the previous parliament, Senator Janet Rice introduced two Bills on the issue:

  • the first — ultimately voted down after a referral to the Senate Economics Legislation Committee and some detailed public consultation — was the COAG Reform Fund Amendment (No Electric Vehicle Taxes) 2020 Bill, which would have made a grant of financial assistance to a State or Territory by the Commonwealth subject to a condition that the State or Territory must not impose an electric vehicle tax in respect of a financial year commencing on or after 1 July 2021, or there would be implications for the sharing of Commonwealth GST revenue; and
  • the second — which lapsed on the prorogation and dissolution of Parliament on 11 April 2022, but which may be restored or revived — was the Electric Vehicles Accountability Bill 2021, under which:
    • the Minister for Energy and Emission Reduction would be required to table in each House of Parliament an annual statement outlining Australia's strategy on electric vehicles; and
    • relevant matters were to be referred to the Productivity Commission, including Australia’s support for the manufacture, purchase and use of electric vehicles.

The extent to which the new Labor Government needs to rely on Greens support to achieve its legislative and policy program will be a major influence on future Commonwealth policy regarding EVs.

One certainty is that this is an issue which is not going away.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.