The Victorian Government announced changes to the congestion levy as part of its 2024/25 Budget Update on 13 December 2024. This levy affects off-street car parking spaces in Melbourne’s central business district (CBD) and surrounding inner suburbs.
This article follows on from the recent DBA article Congestion levy on parking spaces (Melbourne) and discusses some key exemptions and a concession to the levy. All references to legislation will be to the Congestion Levy Act 2005 (Vic) (CLA) unless otherwise specified.
Huge increase in the levy
The levy is proposed to increase from 1 January 2026 by over 73% to bring the levy in Melbourne in line with the category 1 rate in Sydney. This will result in the following price increases:
- Category 1 from $1,750 to $3,030; and
- Category 2 from $1,240 to $2,150.
Broadly, category 1 is the CBD, and category 2 is the surrounding inner suburbs around the CBD. See the Congestion Levy Map for more information.
The parking space levy in Sydney is $2,950 for category 1 and $1,050 in category 2 areas for the financial year ending 30 June 2025.
Under the proposed increases, the category 2 levy in Melbourne will be around double the equivalent amount for category 2 in Sydney.
The legislation will need to be amended to authorise the collection of the proposed increases. Currently, s 11 of the CLA indexes the levy each year by the consumer price index for Melbourne on the prior 15 November.
Note that many landlords collect the levy from tenants on a monthly basis as part of the collection of normal outgoing expenses relating to a tenant on top of the monthly rental fee (including a monthly amount for the levy for the lease of car parks).
Landlords and commercial real estate agents need to decide when to increase monthly outgoings during 2025 to pay for the levy that will be due and payable in early 2026; noting that the 2026 levy is based on the use of car parks in 2025. However, given the increase was only announced in December 2024 and has yet to be finalised as law, landlords and agents may wish to wait until when the CLA is amended before increasing the levy collected.
In particular, the 2026 levy is assessed having regard to the use of parking spaces in the preceding calendar year. In the Court of Appeal decision of the Victorian Supreme Court in Secure Parking Pty Ltd (ACN 108 043 689) v Commissioner of State Revenue [2017] VSCA 68 (Secure Parking) at [48] it states:
… the levy is calculated each year by reference to the number of ‘leviable parking spaces’ that existed during the previous calendar year. Thus, the assessment is retrospective having regard to the existence or otherwise of spaces during the previous year.
Thus, unless the correct amount of levy is collected during the 2025 calendar year, landlords may not have collected enough from tenants to pay the levy. This may result in a siginficant adjustment invoice for tenants when the outgoings are reconciled after the end of the financial year (or relevant period) to reflect the increased levies.
Note that s 34 of the CLA provides that a person who ‘uses’ a parking space in a private car park under an agreement with the owner is required to indemnify the owner in relation to the levy. Broadly, this means that a tenant under a lease is liable for the levy under the CLA even if it is not expressly covered in the lease.
Expansion of the leviable area
Another key change announced in the 2024/25 Budget Update is the expansion of the category 2 area from 1 January 2026. This expanded category 2 area covers a number of additional inner-eastern suburbs that are in a similar proximity to the CBD to existing levy areas such as parts of Richmond, South Yarra and Prahan. Further details are available here:
https://www.sro.vic.gov.au/news/congestion-levy-updates
Do I have to pay the levy even if the car park is ‘unused’?
Broadly, the answer is yes unless an exemption applies.
Interestingly, in Sydney, the Parking Space Levy Regulation 2019 (NSW) exempts ‘unleased tenant’s parking spaces’ from the NSW car space levy subject to certain criteria being satisfied. However, the CLA contains no equivalent provision, and accordingly, the levy applies to a car park space in Melbourne even if it is not actually used (eg, the building is only at 60% occupancy and 40% of the car parks are not being leased to tenants or used).
The decision in Secure Parking sets out the meaning of the words ‘set aside’ in the context of whether the levy is payable. In this case, certain car spaces in a public car park were temporarily blocked off. However, despite these spaces being blocked off, they were nevertheless set aside for use and the temporary blockages could readily be removed if demand for car spaces increased. Thus, the levy applied as the car spaces were ‘set aside’ for use.
Are there any exemptions or concessions?
There are several exemptions and concessions that may be available depending on the use of the space and certain other criteria. You should seek advice on whether there is an exemption or concession that may be available to your particular circumstances.
Conclusions
More focus is likely to be placed on the congestion levy given the substantial increase in the levy and the expanded area covered. Landlords and agents should review the impact of these changes and check whether there are any methods to legally minimise the levy and seek advice if there is any doubt. Naturally, DBA Lawyers would be pleased to assist.
Related articles:
- DBA Lawyers Tax Services
- Related Tax & Business Services
- Congestion levy on parking spaces (Melbourne) – Part 1
- The new commercial and industrial property tax that starts in Victoria on 1 July 2024
- Objecting against land tax in Victoria
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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licenced financial adviser under the Corporations Act 2001 (Cth).
Note: DBA Lawyers presents regular SMSF Online Updates. For more details or to register, visit www.dbanetwork.com.au or call 03 9092 9400.
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By Daniel Butler, Director ([email protected]), Shaun Backhaus, Director ([email protected]) and Nick Walker, Lawyer ([email protected]), DBA Lawyers.
DBA LAWYERS
14 January 2024