Victorian Premier Ben Carroll has moved to abolish a previously undisclosed levy on public transport fares, just a day after the Victorian Auditor-General revealed commuters had been paying the charge since January 2025 without it being publicly identified.
The “rail improvement charge” added an extra 1 per cent to public transport fares each year on top of normal inflation-linked increases, with the Victorian Government planning to collect about $8 billion in net present value terms through to 2062.
The Victorian Auditor-General’s Office found 60 per cent of that revenue — about $4.8 billion — was intended to help fund the first stage of Melbourne’s Suburban Rail Loop, making the levy the project’s largest individual source of so-called value capture revenue.
Carroll announced on Thursday that he intended to abolish the charge, although the decision will still need to go through a formal cabinet process.
“I am a premier who levels with Victorians, and I’m going to level with Victorians today,” Carroll told reporters.
“I will abolish the rail improvement charge. There’ll be a proper cabinet process to come, but it’s my intention and the Treasurer’s intention to abolish that charge.”
Carroll said Victorians deserved both better public transport and transparency about how their money was being spent.
“The way this charge was created and implemented, there was a lack of transparency,” he said.
The decision comes after an Auditor-General’s investigation into the Suburban Rail Loop revealed the levy had been approved years before it appeared on commuters’ fares.
According to VAGO, the government first approved the charge in August 2021, when Carroll was Minister for Public Transport.
It was subsequently confirmed as part of the SRL funding package in December 2023 and again in November 2024.
The November 2024 decision is particularly damaging for the government’s transparency argument.
VAGO found the government approved a communications plan dealing with its SRL funding model but also approved excluding any reference to the rail improvement charge from public communications.
Instead, the government notionally allocated land tax revenue from areas surrounding SRL stations towards the project while retaining the fare levy as the new revenue stream needed to service project-related borrowings.
When the government publicly announced its SRL value-capture model in December 2025, it identified five funding mechanisms: land tax revenue in SRL precincts, windfall gains tax, developer infrastructure contributions, a future car parking levy and state-led property development.
The public transport fare charge was not mentioned.
VAGO concluded the announcement “lacked transparency” because the fare levy had already been introduced from January 1, 2025.
“The government and Transport Victoria did not acknowledge the new public transport fare levy in their public communications about the 2025 and 2026 annual fare increases,” the Auditor-General found.
“As at June 2026, they still have not announced it.”
Carroll was Public Transport Minister when the levy was initially approved in 2021, but said on Thursday that he was not involved in creating it.
He also declined to say exactly when he first became aware of the charge.
“I am not going to stand here and re-litigate the past,” Carroll said.
He said his premiership would put accountability and transparency “at the forefront” and revealed he had asked his department to check whether there were any other undisclosed charges.
Deputy Premier Gabrielle Williams was Public Transport Minister when the levy began appearing in fares in January 2025.
Williams said she was not a member of the cabinet budget and finance committee that made decisions about how the levy would be publicly presented and said she had only recently learned of a decision to deliberately exclude it from public communications.
“What I was unaware of was that, at any decision-making table, there had been any decisions taken about deliberately obfuscating the structure of our fare increases,” Williams said.
She acknowledged Victorians should have been told.
“This is clearly something that has not met the pub test,” she said.
“We want to do things differently.”
Treasurer Colin Brooks, who took over the portfolio this month, had earlier disputed the characterisation that the charge directly funded the Suburban Rail Loop.
Brooks said the money went towards public transport infrastructure and services more broadly, although he conceded the government should have been more transparent.
“That charge is not contributing directly to the Suburban Rail Loop,” he said on Wednesday.
“That charge is going back into … public transport infrastructure and services across the state.”
However, the Auditor-General’s report is explicit that the government planned to allocate 60 per cent of revenue from the levy to SRL East, and that it was expected to provide almost half of the overall value-capture revenue needed for the project.
VAGO said the levy was required to create the new revenue needed to service SRL-related borrowing.
The charge applied as an annual one per cent increase to public transport fares across metropolitan Melbourne and regional Victoria.
Although the original government approval referred to metropolitan heavy rail and excluded regional buses, VAGO found Victoria’s integrated fare structure meant the increase was, in practice, applied across public transport modes.
The financial effect was relatively small at first but would have compounded significantly over time.
VAGO modelling showed that without the charge, the nominal daily full fare for Melbourne Zones 1 and 2 was projected to reach about $13.90 in 2035. With the additional annual one per cent increase, it would rise to about $15.50.
By 2062, the modelling put the difference at $27.10 without the charge compared with $39.20 with it, although those figures are nominal future dollars and incorporate decades of inflation.
In today’s dollars, VAGO estimated the levy could eventually increase a $10.60 daily fare to about $15.50 by 2062.
The Department of Transport and Planning had also raised concerns that progressively higher fares could encourage some commuters to switch from public transport to cars, potentially increasing road congestion.
VAGO said advice to government warned the charge could create affordability problems for some public transport users.
Despite its long-term revenue target, the levy has so far generated far less money than initially forecast.
The Department of Treasury and Finance told VAGO that only about $6.2 million had been collected between January 2025 and the end of February 2026.
Public transport fare revenue across metropolitan Melbourne was running about 20 per cent below budget during the second half of 2025.
Government decisions to offer free and discounted public transport — including free travel for children, free weekend travel for seniors and widespread fare discounts during 2026 — have further reduced revenue.
Scrapping the charge nevertheless creates another complication for the financing of the Suburban Rail Loop.
The government’s long-standing funding model envisages SRL East being paid for approximately one-third by Victoria, one-third by the Commonwealth and one-third through value-capture measures.
SRL East is the 26-kilometre first stage of the orbital railway, connecting Cheltenham to Box Hill via Clayton, Monash, Glen Waverley and Burwood, with passenger services targeted to begin in 2035.
The state’s publicly disclosed cost has been up to $34.5 billion.
But VAGO has raised serious doubts about both the funding and the cost.
The Auditor-General found the Victorian Government has actually approved $23.3 billion in state Budget funding for SRL East, despite having publicly announced only $11.8 billion.
An additional $11.5 billion in state funding was approved in December 2023 but was not publicly announced at the time or clearly identified in state Budget papers, VAGO found.
The Commonwealth has committed $6 billion, while Victoria has been seeking about $11.5 billion from Canberra.
That leaves a funding gap of approximately $5.5 billion, according to VAGO.
The gap means the state currently does not have sufficient approved funding to sign the contract for one of the major station construction packages.
The audit also challenged the government’s confidence that SRL East can be delivered within its previously announced budget.
VAGO concluded the project was “more likely than not” to exceed the publicly disclosed cost of up to $34.5 billion, citing unexpected ground conditions and contamination, higher-than-expected market prices and additional costs created by government decisions to slow spending as Victoria sought to manage its debt position.
The 2035 opening date is also under pressure.
One early works package finished around six months late, station procurement has slipped by about a year and the project’s remaining schedule buffer is limited.
VAGO said the available evidence suggested the commitment to start carrying passengers by the end of 2035 was at risk.
The findings landed only a day after Carroll announced a major reset of the project under his new premiership.
On Tuesday he said the government had identified approximately $1 billion in immediate savings, with another $1 billion to be sought through an independent technical review.
Carroll said “nice-to-haves” including some underground station interchanges, pedestrian bridges, car parking and other additions would be dropped or redesigned.
The government said the changes would bring the estimated investment down to about $33.3 billion, with the technical review targeting a further reduction to around $32.3 billion.
But the Auditor-General’s report raised questions about how much of those announced savings can genuinely be counted against the published $34.5 billion figure.
VAGO found that much of the estimated cost of underground connections between new SRL stations and existing railway stations was not included in the headline project budget in the first place.
The three proposed interchanges at Southland, Glen Waverley and Box Hill were estimated to cost around $1.7 billion, while only about $104 million had been included in the existing project budget.
The Glen Waverley and Box Hill underground interchanges are now not proceeding as part of the current plan.
The SRL Authority said these were potential future scope options rather than approved project costs and therefore were properly considered separately from the headline budget.
The government continues to maintain that reducing the proposed scope will lower the project’s total estimated investment.
Opposition Leader Jess Wilson seized on the revelation of the fare levy, describing it as 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.
She pointed to Carroll’s role as Public Transport Minister when the measure was initially approved in 2021 and asked: “What other secret taxes are Labor levying on Victorians without telling them?”
The opposition has used the controversy to sharpen its attack on the government’s financial management ahead of the November state election, while Labor is attempting to present Carroll’s decisions on the levy, SRL spending and public service restructuring as evidence of a break from the approach of former premiers Daniel Andrews and Jacinta Allan.
Carroll has insisted the Suburban Rail Loop itself will continue.
“The SRL will be built on time,” he said when announcing his cost-cutting plan this week.
But abolishing the fare levy removes a revenue source that the Auditor-General says was expected to become the largest single value-capture contribution to SRL East.
That leaves the Carroll Government with a new question: if commuters will no longer provide billions of dollars through the rail improvement charge, where will the money needed to replace it come from?
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