Melbourne Congestion Levy Explained: What You Need to Do to do NOW to Minimise your Risk
If you own or operate off-street parking in Melbourne's inner suburbs, you could be facing a sharp increase in annual costs. The Melbourne Congestion Levy is changing – and fast. Here’s what you need to know to stay compliant and protect your bottom line.
What is the Congestion Levy?
The Congestion Levy is an annual charge imposed by the State Revenue Office on off-street parking spaces in designated areas of Melbourne which aims to reduce traffic congestion by encouraging the use of public transport over private vehicles.
The levy applies to both private and public car parks within two specific zones:
Category 1 (Red Zone): Primarily covers Melbourne's CBD.
Category 2 (Blue Zone) and Category 2 Expansion (Grey Zone): Encompasses surrounding inner suburbs.
The Congestion Levy is calculated based on the number of non-exempt parking spaces and is payable by the owner or operator of the car park.
What’s Changing in 2026?
Significant changes to the Congestion Levy in Melbourne are set to take effect from 1 January 2026:
Increased Congestion Levy Rates:
Category 1 (Red Zone): The annual levy will increase from $1,750 to approximately $3,030 per parking space.
Category 2 (Blue Zone): The annual levy will rise from $1,240 to approximately $2,150 per parking space.
These increases aim to align the Victorian Congestion Levy rates with New South Wales rates and further discourage the use of private vehicles in congested areas.
Expansion of Congestion Levy Zones:
Category 2 Expansion (Grey Zone): The annual levy of approximately $2,150 per parking space will be applied for the first time in 2026 (based on usage in 2025). The Category 2 Expansion area will expand eastwards to include additional inner-eastern Melbourne suburbs such as Richmond, Abbotsford, and areas along St Kilda Road. This expansion is designed to capture suburbs with similar proximity to Melbourne’s CBD as existing levy areas.
Who Pays the Congestion Levy?
Liability for the Congestion Levy depends on the type of car park:
Public Car Parks: Both the owner and operator are jointly and severally liable.
Private Car Parks: The owner is solely liable.
If you lease out parking spaces, the Congestion Levy can often be passed onto tenants, depending on the terms of the lease agreement.
How to Minimise your Congestion Levy Exposure
Apply for Levy Exemptions and Concessions
Certain parking spaces may be exempt from the levy, including:
Spaces used exclusively for residential purposes.
Visitor parking spaces.
Spaces designated for disabled persons or emergency vehicles.
Be Prepared for the Changes
Given the impending changes, it is highly advisable to:
Review Lease Agreements: Ensure that lease agreements allow for the recovery of the Congestion Levy from tenants.
Assess Parking Space Usage: Since the Congestion levy is based on the previous year's usage, 2025 usage will determine the 2026 levy.
Stay Informed: Keep abreast of updates from the State Revenue Office and consult with legal or tax professionals and car parking experts as needed.
Conclusion
The upcoming changes to the Congestion Levy represent a significant shift in the cost structure for off-street parking in Melbourne's inner suburbs. By understanding these changes and preparing accordingly, property owners and operators can mitigate financial impacts and ensure compliance.
Need Help? Parking Asset Advisory Can Assist.
Parking Asset Advisory can help you navigate these changes—whether it's reviewing your levy exposure, optimising your car park usage, or renegotiating lease terms to better manage cost recovery.
Get in touch to ensure your asset is protected, performing at its best and returning maximal revenue. Book a call with a Parking Expert today.
