Melbourne’s central business district is bracing for another financial blow to commuters and local businesses, as motorists who rely on off-street paid parking face an extra $1,386 per year on top of existing parking fees, due to the Allan government’s increased congestion levy.
Starting January 1, 2026, the levy — essentially a tax on car parks in inner-city areas — will rise by 73 per cent in the zones where it applies. Property owners, including commercial car parks and shopping centres, will be required to pay between $2,150 and $3,030 per off-street parking space per year, depending on location. The government says the levy is intended to reduce vehicle congestion and emissions.
However, critics argue the measure unfairly targets workers and families. Cath Evans, Victorian executive director of the Property Council, emphasised the essential role of off-street parking for commuters. “Driving is, for many people, undoubtedly safer than catching public transport at odd hours of the morning or night. This policy disregards worker safety,” Evans said. She noted that parents managing school drop-offs and pick-ups often rely on cars as a necessity, not a luxury.
According to analysis by the Property Council, the increased costs for commercial car park operators are expected to be passed directly onto motorists, amounting to $1,386 per year per driver. Since the introduction of the congestion levy in 2006, rates have reportedly grown 658 per cent, generating a total of $1.477 billion for the Victorian government, with no evidence that congestion has been reduced. Evans warned that the hike could discourage investment in Melbourne’s CBD and hinder the city’s economic recovery.
Local business owners have expressed concern. Steven Adigrati, founder of Le Style Boutique on Little Collins Street, said foot traffic has declined noticeably over the past three to six months. “It was actually easier coming out of Covid than it is right now to convince people to come into the city,” he said, urging the government to consider temporary reductions or free parking periods to attract visitors back to the CBD.
Yarra Mayor Stephen Jolly echoed these concerns, calling the levy increase a revenue-raising measure rather than a congestion solution. “The effect on Yarra could be the loss of one or both of our shopping centres. This would be the biggest economic hit to Yarra in its history,” he said.
The increased rates were first announced by former Treasurer Tim Pallas in December 2024. A Victorian government spokesperson defended the measure, estimating that congestion could cost the state economy more than $10 billion annually 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, adding that industry consultation informed the final plan.
The coming year will test Melbourne’s CBD recovery, as motorists, families, and local businesses navigate the financial impact of the steep car park levy.
