A legal battle commenced in the High Court in June 2019 has sought to have certain sections of the Victorian Duties Act 2000, which provide for the assessment and imposition of stamp duty on the sale and transfer of new motor vehicles, declared invalid. If successful, the case may also affect the validity of luxury car taxes imposed by the Victorian and Queensland Governments on the sale of motor vehicles.
The Constitutional challenge has been brought by Tourism Holdings Australia Pty Ltd (claimant), a business that modifies vehicles into motor homes and then hires out new motor homes and 4WD vehicles to customers under rental agreements for an agreed term and price. Its challenge has been brought against the State of Victoria and the Victorian Commissioner for State Revenue (Victorian Commissioner).
The challenge has been brought following two notices of assessment being issued by the Commissioner of State Revenue to the claimant alleging that the claimant has underpaid duty on the registration of its new motor homes and 4WD vehicles in the amount of approximately $2.9 million including penalties and interest. It is alleged by the Victorian Commissioner that the claimant paid amounts of motor vehicle duty for its motorhomes and 4WDs on the basis of their original unmodified value, prior to being converted into motor homes, instead of their increased value as converted.
In summary, the Constitutional challenge alleges that:
- Stamp duty imposed by the Victorian State Government upon the application for registration of a motor vehicle amounts to a ‘duty of excise’ within the meaning of section 90 of the Constitution;
- Under section 90 of the Constitution, the power to impose a ‘duty of excise’ rests solely with the Commonwealth Government and is not within the power of the States; and
- Consequently, the claimant alleges that:
- the Victorian Government never had the power to impose stamp duty on new motor vehicles in the manner in which it has purported to do so;
- there is no proper legal basis for the Victorian Government to have received and retained any revenue generated from the imposition of stamp duty; and
- the Victorian Government is liable to repay motor vehicle stamp duty paid by the claimant.
The claimant asserts that a duty of excise, within the conception of that term in section 90 of the Commonwealth Constitution, is a tax upon the production, manufacture, sale or distribution of goods. The basis for the assertion that motor vehicle stamp duty is a ‘duty of excise’ within the meaning of section 90 of the Constitution is that:
The Duties Act 2000 provides that:
- the authority responsible for registration of motor vehicles must not register a motor vehicle unless duty is paid on the application (subject to any applicable exemption);
- an applicant for registration of a motor vehicle must lodge with the application a statement of the dutiable value of the motor vehicle;
- duty is payable by the applicant for registration; and
- duty becomes payable on the lodging of the application for registration;
- Under the Victorian Road Safety Act 1986, the motorhomes and 4WD vehicles must be registered in order for them to be used lawfully on public roads;
- As a consequence, motor vehicle duty is payable at a point prior to the point at which the underlying motor vehicle may be lawfully used for the purpose it was produced; and
- In further consequence, the motor vehicle duty amounts to a tax ‘upon the production, manufacture, sale or distribution of goods’ – in other words, a ‘duty of excise’ within the meaning of section 90 of the Constitution.
In addition to seeking orders declaring the assessment and imposition of stamp duty to be unconstitutional and legally invalid, the claimant is seeking an order for the refund of all stamp duty assessed to it in respect of its registration of all new motor vehicles. In the alternative, it seeks a refund of motor vehicle duty payments within the 12 months preceding the commencement of legal proceedings.
The case is very similar to proceedings brought in the late 1990s to challenge the Constitutional validity of the States imposing ‘licence fees’ on the sale of tobacco. For example, in the case of Ha & Anor v State of New South Wales, the High Court held that State based tobacco licence fees were in fact duties of excise which were beyond the power of the States to levy.
In its initial response to the claim, the Victorian Commissioner stated that both he and the State of Victoria expect that most, if not all, of the States and Territories, and possibly the Commonwealth, will seek to intervene in the case so as to be heard on the question of the Constitutional validity of the imposition of motor vehicle stamp duty (the Northern Territory having already given notice of its intention to do so).
This article was written by Evan Stents – Lead Partner, & Christian Teese – Senior Associate, Automotive Industry Group | HWL Ebsworth Lawyers