The Allan government is weighing five new tax and levy options to plug an $11.5 billion shortfall in funding for Melbourne’s Suburban Rail Loop (SRL), including a new car park levy in suburban areas and a tax on rezoned land.
While the government has not ruled out charging households near new SRL stations, senior ministers suggest this is unlikely. The proposals under consideration include:
- A congestion levy on public and private car parks near SRL stations
- A windfall gains tax on uplifted land values after rezoning
- An SRL infrastructure contribution levy on developers
- A precinct development charge
- Ring-fencing land tax revenue from property sales in SRL precincts for the project
These measures, collectively branded as “value capture,” would ensure that those who benefit from the infrastructure help pay for it.
The SRL East – a $34.5 billion, 26 km underground rail link between Cheltenham and Box Hill – is expected to be funded one-third by value capture, one-third by the state, and one-third by the Commonwealth. So far, the federal government has committed $2.2 billion.
Critics, including Opposition major projects spokesman Evan Mulholland, call the move a “desperate attempt by a debt-addicted government to fund a project it can’t afford.” Experts doubt Victoria can raise the required $11.5 billion, noting no Australian project has achieved this scale of value capture before.
Some levies, like the car park charge, are unlikely to take effect until the SRL East opens in 2035. Others would be phased in over decades to reduce early economic impacts. Ministers are also wary of introducing household charges, warning of political backlash after recent increases in other state levies.
Suburban Rail Loop Minister Harriet Shing defended value capture, citing historical precedents like the Sydney Harbour Bridge and Gold Coast light rail. Economists, however, warn that while the concept works well in theory, it is difficult to implement without deterring investment or sparking opposition.
A final funding plan will be presented to cabinet in the coming weeks and will form the basis of Victoria’s pitch for additional federal funding.
