By Carla Jaeger and Kieran Rooney
Off-street parking will get significantly more expensive in inner-city Melbourne in 2026, after the Allan government imposed a rise of almost 80 per cent on a levy designed to curb the state’s traffic congestion.
Congestion is expected to punch a $10 billion hole in the state’s economy by 2030, but the Property Council of Australia argues the congestion levy is ineffective to fight it, and the rise would create an unsustainable burden on Melbourne business and property owners.
The increase in the congestion levy is designed to reduce traffic in inner Melbourne.Credit: Eddie Jim
Earlier this month, then-treasurer Tim Pallas announced an increase to the congestion levy, which taxes private and public car park operators around the inner city, amounting to 79 per cent over two years. He said the levy would be expanded and would rise in line with a similar charge in Sydney as of January 2026.
The tax, introduced in 2006, is designed to decrease traffic congestion by deterring motorists. The costs are passed on directly to people who use the car parks.
Cath Evans, the Victorian executive director of the Property Council of Australia, wrote to Jaclyn Symes on the day Symes was sworn in as treasurer imploring her to reconsider the rise, which Evans said would be ineffective.
“These changes, made without industry consultation, will exacerbate the already challenging economic conditions in Victoria, and impose significant financial strain on businesses and property owners, without offering a clear solution to the issue of traffic congestion,” Evans said.
“Victoria already has the highest number of property-related taxes in Australia, and further increases to the levy risk exacerbating the state’s growing reputation as an unattractive destination for investment.”
Think tank the Grattan Institute has backed increases to the CBD’s parking levy as a way to curb the state’s traffic, as well as initiatives including charging inner-city drivers during peak hours and discounting off-peak commutes on public transport.
The hike increases category-1 fees from $1750 next year to $3003 in 2026, per car park. Category-2 fees will rise from next year’s $1240 fee to $2150 in 2026. The increases will bring Melbourne in line with Sydney’s equivalent tax, which is currently 69 per cent higher. The 2024 fees for category 1 and 2 amounted to $1690 and $1200, respectively.
Category-1 areas include Melbourne CBD, Southbank, Domain, Docklands and East Melbourne. The category-2 zone covers Melbourne inner suburbs and will be expanded to include inner-eastern suburbs, including South Yarra, Richmond and Burnley, as well as parts of Windsor and Prahran. It is the first expansion since 2013.
“The announced increases of 79 per cent for both category-1 and category-2 areas will force business to recover a minimum of $13 plus GST per day, per parking space, based on 250 business days annually. This is a substantial burden on businesses, workers, and visitors,” Evans said.
Using the same calculation, the cost for category-1 businesses to recoup the $1690 tax fee in 2024 would be about $7 plus GST, per day, per parking space.
Responding to Evans’ letter, a government spokesperson said congestion was tipped to cost the Victorian economy more than $10 billion by 2030.
“In order to get more cars off our roads, reduce congestion and reduce emissions, we’re harmonising our congestion levy with Sydney, bringing it up to a more appropriate level,” the spokesperson said.
Evans said the rise also contradicted the Allan government’s recent economic growth statement, which spruiked the headline “Victoria is open for business” and aimed to boost the private sector and encourage investment in Victoria.
“Off-street parking contributes minimally to congestion compared to through-traffic, commercial deliveries and on-street parking. Ironically, on-street parking bays, which are more affordable and convenient for parkers, are exempt from the levy. This exemption encourages drivers to circle city blocks in search of available on-street spaces, worsening congestion.”
The Allan government has doubled the fire services levy, increased probate fees, and increased land taxes, as the state tries to return to its first operating surplus since before the pandemic.
The most recent budget update forecast Victoria’s net debt would hit $155.2 billion this financial year and $187.3 billion by June 2028.
However, the update reported the budget is still on track to record an operating surplus in 2025-26, and is forecasting a $100 million improvement, with a surplus of $1.6 billion.
When the levy increase was announced this month, then-treasurer Tim Pallas denied it was designed to protect the budget surplus, pointing to a need to reduce car dependence while making congestion charges fairer.
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