A potential revenue hit worth “billions” has been flagged by the New South Wales government as a result of the high court ruling striking down Victoria’s electric vehicle tax, as state and territories scramble to understand its full impact.
On Wednesday a majority of the high court ruled Victoria’s road-user charge for EV drivers was unconstitutional because the states did not have the power to impose excise taxes on consumption.
The decision has prompted warnings of a major shift in federal financial relations and sparked renewed calls for the federal government to implement national road-user charges.
By overturning a precedent case from 1974, the court opened the way for potential challenges to everything from gaming taxes and car registration to waste levies.
The NSW premier, Chris Minns, told that state’s parliament the ruling “has caught everyone by surprise”.
He noted that the previous Perrottet government had flagged the pending high court decision as “a key risk” to revenues.
The decision will likely prevent NSW and Western Australia from proceeding with plans to introduce road-user charges from 2027, but could imperil other state-imposed levies.
Minns said such charges “generated not just hundreds of millions of dollars, but billions of dollars” for the NSW treasury. It was an “extremely complex ruling”, but at this early stage there were “different readings” of its impacts, he said.
“We’ll have to examine the ruling and then have to speak to the commonwealth about how we fund future road projects across NSW.”
The WA premier, Roger Cook, said his government needed to “look at that decision very carefully and understand its implications”.
In submissions to the high court, Victoria had argued other charges that could be challenged on the same basis.
They included “duties on the transfer or conveyance of goods … motor vehicle duties and vehicle registration charges, commercial passenger vehicle levies, gaming machine levies and ‘point of consumption’ betting taxes and waste disposal levies”.
The Victorian treasurer, Tim Pallas, said he was disappointed with the decision.
“We basically had every confidence that it would stand. The court in its wisdom has now taken a different view of what constitutes an excise,” he said.
Pallas said the government needed more time to “absorb” the “very substantial” decision, but would “make sure that the services that the revenue base in the state assures Victoria’s are preserved”.
Victoria was supported by all states and territories in the case.
The Australian Capital Territory’s chief minister, Andrew Barr, said the decision “will have implications for federal financial relations”.
“The ACT government is currently reviewing the lengthy decision to determine the potentially broad implications,” he told Guardian Australia.
The federal shadow transport minister, Bridget McKenzie, said that “with each passing day the existing fuel tax system becomes less and less equitable as the rich in our inner cities are able to opt out of paying for roads by purchasing electric vehicles”.
“Despite the intergenerational report highlighting the demise of petrol excise, the minister has explicitly refused to consider ensuring all road users contribute fairly to the upkeep of our roads,” she said.
The federal Greens leader, Adam Bandt, warned the Albanese government against implementing a federal EV tax in response to the decision.
The independent MP, Zoe Daniel, welcomed the court’s decision to strike down “a bad tax which only deterred motorists from buying electric vehicles”.
“Transport minister Catherine King needs to get her skates on and introduce fuel standards designed to encourage the sale of fuel efficient vehicles and EVs and in line with comparable countries,” she said.
“We need the government to initiate an equitable plan for a national road user charge.”
The Automobile Association of Australia’s managing director, Michael Bradley, said the decision creates a “major tax reform opportunity” to bring zero emissions vehicles into the road use tax system.
A spokesperson for the federal treasurer, Jim Chalmers, said the government was seeking advice about the “complex” issues it raises.
“We’re focused on getting more electric vehicles into the fleet and we have a plan to deliver that, including incentivising the purchase of electric vehicles through exemptions from fringe benefits tax (FBT) and import tariffs,” the spokesperson said.
“The government has also committed to implement the fuel efficiency standard. We want to work with Victoria and with other states and territories on policy relating to electric vehicles.”
