In December 2024, the Victorian government announced changes to the congestion levy which are intended to come into effect from 1 January 2026. These changes were announced during the 2024-25 Budget Update and therefore strictly speaking, are not a new revenue initiative from the 2025–26 Budget.
What are the changes?
The congestion levy is an annual levy charged on car parking spaces in the inner suburbs of Melbourne.
The levy areas are split into Category 1 and Category 2, with Category 1 being largely within the Melbourne CBD, and Category 2 comprising the surrounding inner Melbourne suburbs.
There are two announced changes to the congestion levy which include:
1. An increase in rates as set out below:
| Category | 2025 rate | 2026 rate | Percentage increase in rate |
| 1 | $1,750 | $3,030 | 73.14% |
| 2 | $1,240 | $2,150 | 73.39% |
2. An expansion of Category 2 to include surrounding suburbs to the east of the Melbourne CBD, including certain areas within South Yarra and Richmond.
At the date of this article, the legislation that will enact the proposed changes has not yet been introduced into Parliament.
The government has announced an exemption for car parking spaces available in schools for no charge, but it appears the exemption will not be available to private schools.
When do the changes apply?
The changes are intended to apply from 1 January 2026.
What are the key impacts to consider?
Whilst the congestion levy is generally payable by the owner and/or operator of a car park, there is no law that prevents the owner and/or operator from passing on the cost of the levy to car park users. As such, car park users can expect to see an increase in the charges payable for parking in the relevant inner Melbourne suburbs.
It should also be noted that the congestion levy liability is calculated based on the use of the parking spaces in the preceding calendar year. This means that it is the usage of the parking space in the 2025 calendar year that will determine the congestion levy liability for the 2026 tax year. Car park owners and operators within the relevant inner Melbourne suburbs, including the new expanded Category 2 suburbs, should start reviewing their congestion levy position ahead of 1 January 2026, including considering whether there are any applicable exemptions or concessions.
What are the next steps?
For further analysis of the Victorian State Budget 2025-26 handed down on 20 May 2025, visit our Victorian State Budget 2025-26 hub
If you have any questions about these potential changes and how they may impact your circumstances, reach out to your Pitcher Partners representative.
