The Victorian State government announced on Thursday 18 December 2025, some of the funding mechanisms for the Suburban Rail Loop (SRL) (which is hoped to be funded one third by the Commonwealth, one third by the State and one third by “value capture”).

The announcement covers the “value capture” component and applies to the SRL East between Cheltenham and Box Hill.

There are two new taxes:

a developer surcharge of $11,350 per new dwelling in the SRL Structure Plan Area from 1 January 2027 as a “SRL Infrastructure Contributions Plans levy” rising to $33,924 between 2032 and 2035 (to raise $2.9 billion over 40 years); and
a car parking levy (ie the congestion levy) in the same areas from 2035 (to raise $800 million over 40 years).

The levy will be indexed annually, so should be higher by the time it becomes payable.

The announcement suggests that the category 1 congestion levy rates will apply in the SRL precincts. These are currently $3,030 per space per year and is indexed to CPI.

Other revenue measures

The Government also expects to raise $1.6 billion in revenue over 40 years from potential projects in the area on State Government land (“State-initiated Development”).

More controversially, the Government will also segregate land tax and windfall gains tax in the SRL precincts, allocating $5.75 billion and $450 million respectively over 40 years. While this is described as “value capture”, there are no changes to land tax or windfall gains tax rates. This is taxation revenue was always going to be received by the State Government.

In practice, more than half of the “value capture” component of the cost of the SRL is still coming from the existing property tax base.

What areas are impacted

The draft areas for the SRL precincts are here:

https://bigbuild.vic.gov.au/projects/suburban-rail-loop/planning/srl-east-precinct-planning

Next steps

No legislation has been introduced to affect the tax changes and State Parliament is not sitting until February. These measures may only be legislated with the mid-year budget amendment bill.

Commercial and Industrial Property Tax (CIPT)

Crucially, there is nothing in the proposal about CIPT revenue (which would be expected to be first levied in 2035). Likewise, while there were media suggestions of a 1% stamp duty surcharge on commercial property in the SRL precincts, this did not evenutate.

Conclusion

Developers in the area will find that the cost of building housing will increase substantially in the SRL precincts due to the developer levies. This adds to the existing burdens of stamp duty on the purchase of land, land tax on holding property for development, vacant residential land tax and windfall gains tax (amongst others).

Whether the increased demand for housing in areas that are already well provided for by public transport will offset the tax raises will be a hot topic of discussion.

Based on the history of the car parking levy, we would expect to see changes in the rates and areas of the congestion levy between now and 2035.

As the building of the SRL progresses, we may see more tax changes designed to raise revenue, particularly if there are cost blowouts in the project.

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Please contact us with any questions on State Tax issues.

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au

Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au