I BACKGROUND

The High Court’s decision in Vanderstock v Victoria [2023] HCA 30 stands as one of the most significant constitutional law decisions in recent years. At surface level, the case relates to a seemingly modest Victorian road-user charge imposed on electric and plug-in hybrid vehicles. However, diving deeper reveals a larger constitutional question: What falls within the meaning of a “duty of excise” under s 90 of the Constitution? This question is relevant in that s 90 gives the Commonwealth exclusive power to impose duties of customs and excise. If Victoria’s charge was properly characterised as an excise, then the State would have acted beyond its constitutional limits.

By majority, the High Court held that Victoria’s Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) was invalid as it imposed a duty of excise. The decision accomplished more than just the striking down of one State road-user charge. It clarified, and arguably expanded, the constitutional meaning of excise by holding that an inland tax on goods can be an excise even when imposed at the stage of consumption or use. In doing so, the Court reopened and overruled part of Dickenson’s Arcade Pty Ltd v Tasmania, while refusing to reopen the modern authorities of Capital Duplicators [No 2] and Ha v New South Wales. The result is a major constraint on States' revenue-raising powers, especially where States seek to impose charges on the use of goods.

II FACTS AND STATUTORY BACKGROUND

The plaintiffs, Christopher Vanderstock and Kathleen Davies, were Victorian residents who owned zero or low-emission vehicles. Vanderstock owned a fully electric vehicle, while Davies owned a plug-in hybrid electric vehicle. From 1 July 2021, Victoria’s ZLEV Act required registered operators of such vehicles to pay a charge based on the number of kilometres travelled on “specified roads”. The Act defined “specified roads” broadly, effectively covering public roads in Victoria and others in Australia. The charge was calculated annually at a prescribed rate per kilometre and was payable by the registered operator of the vehicle, not necessarily the person who drove it. The amount charged depended on odometer declarations made by the registered operator. If the operator claimed that some travel occurred on non-specified roads, the burden of providing evidence was on the operator. Otherwise, the Secretary could assume that all travel occurred on specified roads. The charge and any interest were debts due to the State, and failure to comply could lead to suspension or cancellation of registration.

The practical effect of the scheme was that Victorian owners of electric and plug-in hybrid vehicles had to keep records of vehicle use and pay an annual distance-based charge. The charge was not framed as a general road toll, nor was it imposed on all vehicles using Victorian roads. It applied specifically to ZLEVs. Victoria accepted that the charge was a tax, not merely a fee for services or a payment for a particular road-use privilege. The constitutional conundrum was therefore whether that tax was a duty of excise.

III THE LEGAL ISSUE

The primary issue was whether s 7(1) of the ZLEV Act was invalid because it imposed a duty of excise within the meaning of s 90 of the Constitution. The special case asked the Full Court whether the provision was invalid on that basis. The High Court affirmed that it was and ordered Victoria to pay the costs of the proceeding.

The difficulty was in the meaning of “excise”. Earlier High Court decisions had established that duties of excise are not limited to taxes on locally produced goods. In Capital Duplicators [No 2] and Ha, the Court had held that duties of customs and excise both exhaust the category of taxes on goods: customs duties are border taxes, while excise duties are inland taxes on goods. Those cases clarified that a tax on the production, manufacture, sale or distribution of goods could be an excise. However, they had not covered whether a tax imposed at the stage of consumption or use could also be an excise.

Victoria argued that the ZLEV charge was not a tax on goods, but a tax on the activity of driving a particular kind of vehicle on specified roads. The plaintiffs, supported by the Commonwealth, argued that the charge was a tax on goods because it was imposed on the use or consumption of ZLEVs. The case therefore required the Court to decide two connected questions: first, whether a consumption tax on goods can be an excise; and secondly, whether the ZLEV charge was properly characterised as such a tax.

IV THE PARTIES’ ARGUMENTS

The plaintiffs argued that the ZLEV charge was an inland tax on goods. Although the charge was triggered by use on specified roads, it applied only because the relevant good, the ZLEV, was used. The plaintiffs submitted that “use” was a form of consumption. On that view, the tax was imposed in respect of the consumption of goods and had a sufficient connection with the vehicles themselves. During their oral argument, counsel for the plaintiffs framed the case around another two questions: whether an inland tax imposed on the consumption of goods is a duty of excise, and whether the ZLEV charge itself was the same as such a duty. The plaintiffs relied heavily on Capital Duplicators [No 2] and Ha, arguing that the logic of those cases supported adding consumption to the recognised stages where an excise may be imposed.

The Commonwealth intervened in support of the plaintiffs. Its view was that the charge was not meaningfully avoidable in ordinary use because “specified roads” were defined so broadly. The charge was imposed on the vast majority of uses of ZLEVs and was readily distinguishable from a toll, which applies only to particular roads and can usually be avoided by taking another route.

Victoria, supported by the Attorneys-General of the other States and Territories, challenged that characterisation. Its core argument was that the charge was not imposed on goods as goods, but rather on the activity of driving on public roads. Victoria also sought leave to reopen Capital Duplicators [No 2] and Ha, arguing for a narrower understanding of excise that would limit it to taxes discriminating against goods manufactured or produced in Australia. Victoria also relied on Dickenson’s Arcade, where the Court had held that a consumption tax was not an excise.

V THE DECISION

The High Court held that the ZLEV charge was invalid. The Court refused to reopen Capital Duplicators [No 2] and Ha. The majority treated those cases as having settled the proposition that a duty of excise is an inland tax on goods. The Court found it inappropriate to disturb that doctrine, particularly because it had underpinned Commonwealth-State financial arrangements for more than 25 years, including the GST settlement.

The more complicated question was whether a tax on consumption or use of goods falls within the concept of excise. The majority held that it does. To the extent that Dickenson’s Arcade excluded consumption taxes from the scope of excise, it was reopened and overruled. The majority considered that excluding consumption taxes was an anomalous and unsustainable exception to the current understanding of s 90. Once excise was understood as an inland tax on goods, there was no principled reason to limit it to production, manufacture, sale or distribution while excluding consumption or use.

The majority then held that the ZLEV charge was properly characterised as a tax on goods. The charge was imposed because a ZLEV was used. Its amount was calculated by reference to the distance travelled by that vehicle. It applied selectively to ZLEVs and not to vehicles generally. Although Victoria described the charge as one on road use, the majority looked at the legal and practical operation of the Act. Since “specified roads” covered almost all ordinary public road use, the charge operated in substance as a tax on the use of ZLEVs. It was therefore a tax on goods at the stage of consumption.

Justice Gordon’s analysis provides a particularly compelling framework for evaluating this issue. Her Honour rightly emphasised that a court must scrutinise both the legal and practical operation of a statute to ensure that constitutional limits are not avoided by mere drafting devices. Applying this approach, the ZLEV charge cannot be characterised as a generic road-use fee. Because the definition of “specified roads” is so expansive, the tax effectively targets the use of ZLEVs exclusively, meaning virtually any operation of these vehicles triggers the liability.

Conversely, the dissenting opinions adopted a significantly more restrictive interpretation. Justice Steward, leaning heavily on historical precedent, argued that an excise should be understood strictly as a tax on locally produced or manufactured goods, aligning his Honour's view with Peterswald v Bartley and the minority in Ha. From this perspective, the ZLEV charge is not a tax imposed on a step in the production or distribution chain. Rather, his Honour conceptualised it as an ongoing post-consumption levy, paid as the asset depreciates over time well after entering the domestic market.

VI IMPLICATIONS

The immediate consequence of Vanderstock was that Victoria’s ZLEV charge was deemed unconstitutional. However, the wider significance of the case is much greater. First, the decision bolsters the Commonwealth’s exclusive control over taxes on goods. By confirming that a tax on consumption or use can be an excise, the High Court has closed a pathway that States may have used to design taxes around the point of sale or production.

Secondly, the case affects the future of charges in road-use. Governments face a real policy problem in that as electric vehicle uptake increases, fuel excise revenue may decline. States may wish to recover road-related revenue through distance-based charges on electric vehicles. Vanderstock does not necessarily prevent every road-user charge. For example, a genuine toll, congestion charge, registration fee or charge for a particular service may still be valid depending on its design. However, a charge that is selectively imposed on the use of particular goods, and calculated by reference to their use, risks being characterised as a tax on goods and therefore as an excise.

Thirdly, the decision shows the Court’s willingness to look beyond statutory labels. Victoria’s description of the ZLEV charge as a charge on road use did not determine its character. The Court examined the substance and practical operation of the law. This is for constitutional law as a whole. States cannot avoid s 90 simply by framing a tax on goods as a tax on an activity associated with those goods.

Ultimately, Vanderstock has profound consequences for federalism. The decision limits State fiscal autonomy and reinforces the centralisation of taxation power in the Commonwealth. For critics, these risks making the States overly dependent on Commonwealth funding and less able to respond creatively to new policy challenges. For supporters, the decision preserves the purpose of s 90 by preventing fragmented State taxes on goods and maintaining national economic unity.

VII CONCLUSION

Vanderstock v Victoria stands as a landmark decision because it finally resolves a constitutional question left open for decades: can a state tax on the consumption or use of goods amount to an excise? The High Court answered with a definitive yes. By invalidating Victoria’s ZLEV charge, the majority confirmed that section 90 reaches far beyond taxes on production, manufacture, or distribution, extending all the way to the point of consumption. Consequently, this case is about much more than electric vehicles. It fundamentally reshapes the constitutional architecture of Australian taxation, resets the boundaries between state and federal power, and reinforces the continuing force of section 90 in a modern economy.

VIII FOOTNOTES

Vanderstock v Victoria [2023] HCA 30 (‘Vanderstock’)

Australian Constitution s 90.

Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) ('ZLEV Act').

Dickenson's Arcade Pty Ltd v Tasmania (1974) 130 CLR 177.

Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561 ('Capital Duplicators [No 2]').

Ha v New South Wales (1997) 189 CLR 465 ('Ha').

Vanderstock (n 1) [2] (Kiefel CJ, Gageler, Keane, Gordon and Steward JJ).

Ibid.

ZLEV Act (n 3) s 7(1). See also Vanderstock (n 1).

ZLEV Act (n 3) s 3(1) (definition of 'specified roads'). See also Vanderstock (n 1).

ZLEV Act (n 3) ss 7(1), 8. See also Vanderstock (n 1).

ZLEV Act (n 3) s 9. See also Vanderstock (n 1).

ZLEV Act (n 3) s 9(3).

Ibid s 9(4).

ZLEV Act (n 3) ss 14, 17. See also Vanderstock (n 1).

Vanderstock (n 1) [14] (Kiefel CJ, Gageler, Keane, Gordon and Steward JJ).

Ibid.

ZLEV Act (n 3) s 7(1); Australian Constitution s 90.

Vanderstock (n 1) [1] (Kiefel CJ, Gageler, Keane, Gordon and Steward JJ).

Ibid.

Capital Duplicators [No 2] (n 5).

Capital Duplicators [No 2] (n 5) (Mason CJ, Brennan, Deane and McHugh JJ); Ha (n 6) (Brennan CJ, McHugh, Gummow and Kirby JJ).

Capital Duplicators [No 2] (n 5); Ha (n 6) (Brennan CJ, McHugh, Gummow and Kirby JJ).

Vanderstock (n 1).

Ibid.

Ibid.

Ibid.

Vanderstock (n 1).

Ibid.

Ibid. See also Capital Duplicators [No 2] (n 5); Ha (n 6) (Brennan CJ, McHugh, Gummow and Kirby JJ).

Vanderstock (n 1) (Kiefel CJ, Gageler, Keane, Gordon and Steward JJ).

Ibid.

Ibid.

Ibid.

Dickenson's Arcade Pty Ltd v Tasmania (n 4) (Barwick CJ).

Vanderstock (n 1) (Kiefel CJ, Gageler, Keane and Gordon JJ).

Ibid.

Ibid. See Dickenson's Arcade Pty Ltd v Tasmania (n 4).

Vanderstock (n 1) (Kiefel CJ, Gageler, Keane and Gordon JJ).

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Peterswald v Bartley (1904) 1 CLR 497.

Vanderstock (n 1) (Steward J). See Ha (n 6) (Dawson J dissenting).

Vanderstock (n 1) (Steward J).

Ibid (Kiefel CJ, Gageler, Keane and Gordon JJ).

Vanderstock (n 1) (Kiefel CJ, Gageler, Keane and Gordon JJ).

Ibid.

Ibid.

Ibid.

Vanderstock (n 1) (Kiefel CJ, Gageler, Keane and Gordon JJ).

Ibid.

Ibid.