Updated ,first published
Former premier Jacinta Allan and several of her ministers chose not to tell Victorians about a levy the government slapped on public transport fares in a bid to bankroll the Suburban Rail Loop and other Big Build projects.
The Victorian Auditor-General on Wednesday exposed the hidden tax in a scathing report that also revealed the SRL East tunnel between Cheltenham and Box Hill is set to cost at least $36 billion and is already at risk of missing the government’s promised 2035 completion date.
The levy, which has been in place since January 1 last year, involves a 1 per cent annual increase on all public transport fares on top of existing adjustments in line with inflation. The Auditor-General criticised the government for keeping Victorians in the dark about its introduction.
Two government sources confirmed to The Age that this was a decision made by government leadership when the policy was approved at a December 2023 meeting of the state’s four-person budget and finance committee.
The implementation of the charge was approved at that meeting rather than by the full cabinet, according to the sources who spoke on the condition of anonymity to detail internal deliberations, and it was decided that it would not be detailed to the public, with no communications strategy approved for the decision. A government minister confirmed the proposal never came before the full cabinet.
Premier Ben Carroll was not on the subcommittee at the time – he was moved on to it in 2024. Members included Allan, former treasurer Tim Pallas and ministers Danny Pearson and Jaclyn Symes, all of whom have been contacted for comment.
Carroll, who replaced Allan as premier last month, responded to the Auditor-General’s report by pledging to be honest with Victorians in a statement that appeared to reference the decision of his predecessors.
“I lead a government that levels with Victorians. When costs change, we’ll tell you. When we find savings, we’ll bank them,” he said.
“I’m a premier taking the state in a new direction and Victorians deserve to know what their money is buying. Under my leadership, they will.”
In the report tabled in parliament on Wednesday, the Victorian Auditor-General said the levy – dubbed the “rail improvement charge” – was first conceived in 2021 as the government sought ways to pay a third of the rail loop’s initial $34.5 billion budget through private sector taxes known as value capture.
“The government plans to allocate 60 per cent of the revenue it collects through the levy, estimated at $4.8 billion in net present value (NPV) terms to 2062, to fund SRL East,” the report said.
“This levy will be the project’s largest source of value capture revenue.
“The government and Transport Victoria did not acknowledge the levy in their public communications about the 2025 and 2026 annual fare increases.”
In total, Treasury estimated the charge would bring in about $8 billion in net present value over several decades.
The government unveiled five value capture measures in December, including existing land tax revenue in SRL East precincts, existing windfall gains tax revenue in the precincts, infrastructure contributions from property developers, revenue from state-initiated property development, and a car parking levy.
But the Auditor-General’s report exposed how the government did not announce the public transport levy ahead of its 2025 commencement. It said the charge was “not fully consistent with the state’s value capture framework”.
In a written response to Auditor-General Andrew Greaves, Department of Transport and Planning secretary Jeroen Weimar said the levy was intended to contribute to funding the broader public transport network.
“The report mischaracterises the RIC as a funding mechanism for SRL,” he said.
He was backed by Chris Barrett, the new Department of Premier and Cabinet secretary appointed by Carroll, who told Greaves that the levy “does not form part” of the funding strategy for SRL East.
Treasurer Colin Brooks on Wednesday conceded the government could have been more transparent about how the government spent the levy, even as he maintained it was not directly contributing to the SRL. Brooks, who has been the treasurer for about four weeks, said he did not know about it before the report.
Greaves also warned the project was already behind schedule, putting at risk its promised 2035 completion date.
“SRLA has made significant progress planning SRL East precincts and delivering early rail infrastructure works … However, delays, cost increases and emerging risks mean this is not reasonably assured at this early stage,” the report said.
“The project has experienced significant delays. SRLA finished one early works package around six months late and procurement processes for the stations packages are delayed by around one year.
“This puts the government’s target to start running trains through SRL East by 2035 at risk.”
The rail loop was announced in 2018, and a business and investment case produced by the Andrews government three years later argued the first two stages of the project – through Melbourne’s eastern and northern suburbs – would deliver a positive return on investment.
This was calculated by estimating both stages would cost up to $50.5 billion if delivered together, a figure which has been questioned because SRL East had a budget of $34.5 billion.
An individual cost-benefit analysis of the first stage through the eastern suburbs was never completed or reported publicly despite requests to do so by Infrastructure Australia.
According to the watchdog’s report, SRL East is “more likely than not to exceed its publicly disclosed cost of up to $34.5 billion” – potentially costing taxpayers at least $36 billion overall.
The Auditor-General said extra costs had been added because of unexpected ground conditions and contamination, and because of government decisions to slow down spending on the project to manage debt.
It also said pricing for the linewide and station contracts had “higher than expected market pricing”.
Labor has promised to pay for the project with a three-way funding split between the state government, the federal government, and so-called value capture measures.
The Albanese government has so far committed $6 billion to the project, including a $3.8 billion commitment in the last budget, but not the full $11.5 billion sought by the state.
The Auditor-General found the level of investment requested from the Commonwealth for a single project was unprecedented, warning the missing money represented a risk as the government sought to sign the remaining contracts.
“The funding gap of around $5.5 billion means the state does not have sufficient funding approved to sign the contract for the second stations package. This package is currently in procurement,” the report said.
The Suburban Rail Loop Authority had intended to award its second station package by May this year but was now aiming to lock it in by May next year, according to the Auditor-General.
“The funding shortfall needs to be resolved before the [Works Package E] contract can be signed,” the report said.
In November 2024, Treasury advised the government that if no further federal was forthcoming, the state could extend the end date of its value capture taxes from 2062 to 2082 to raise enough money to cover additional borrowings.
“However, the same Department of Treasury and Finance advice noted that preliminary modelling indicated that the cost of additional state borrowings over a 60-year period is likely to exceed the additional revenue that may be generated,” the report said.
The findings have been released in the same week that Carroll pledged to deliver $2 billion in savings for SRL East. He committed to more than $1 billion in savings from changes to station interchanges and by dismantling the Suburban Rail Loop Authority, taking the estimated cost down to $33.3 billion, while another $1 billion in savings will be sought through an expert review.
Speaking on Wednesday, Brooks maintained the government was confident the project would come in “on time and on budget”.
Opposition Leader Jess Wilson has pledged to pause and review the project if the Coalition wins November’s state election.
She said the secret levy was “a scandal of the highest order”.
“The independent Auditor-General has exposed that Labor has taxed every single public transport fare since January 2025 and they never told the public about it,” Wilson said.
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Chip Le Grand leads our state politics reporting team. He previously served as the paper’s chief reporter and is a journalist of 30 years’ experience.Connect via email.
Angus Delaney is a state political reporter at The Age. Email him at angus.delaney@theage.com.au or contact him securely on Signal at angusdelaney.31Connect via email.
