What Conveyancing Solicitors Need to Know About the Congestion Levy

The congestion levy is an annual tax under the Congestion Levy Act 2005 (Vic) (the Act). It applies to certain off-street motor vehicle parking spaces located in designated inner areas of Melbourne.

From 1 January 2026, both the rate of the congestion levy and the area to which it applies increased.

Parking spaces used exclusively for residential purposes are excluded from the congestion levy regime.

Examples include:

• A parking space for a residential unit where the residential unit is the owner’s principal place of residence
• A parking space for a residential unit that is used by a tenant who is leasing the unit from the owner
• A parking space that is used exclusively for residential purposes for temporary accommodation, such as a hotel, serviced apartment or club that provides accommodation.

However, if the residential landowner rented out a parking space that forms part of their main residence to a third party, then, subject to any exemptions, the congestion levy would apply to that parking space.

The congestion levy applies to two distinct areas within inner Melbourne: the Category 1 levy area and the Category 2 levy area.

Solicitors can determine which suburbs of Melbourne are subject to either the Category 1 levy area or the Category 2 levy area, by visiting the State Revenue Office’s (SRO) congestion levy map webpage.

For the 2026 calendar year (based on the parking space use in the prior calendar year), the rates are as follows:

Category 1 levy area: $3,030 per parking space

Category 2 levy area: $2,150 per parking space.

Example congestion levy calculation:

Property owner A owns a commercial property located in the Category 1 levy area that has 10 parking spaces for staff (which are not exempt nor subject to any concession for the entirety of the 2025 calendar year). So, in 2026, property owner A’s total annual congestion levy liability is: 10 x $3,030 = $30,300.

Under section 9 of the Act, the owner of the parking space is liable for the congestion levy.

Professional car park operators (known as an ‘operator’ under the Act) of ‘public car parks’ where the car park operator is not the registered owner of the land, may be jointly and severally liable for the congestion levy with the registered owner. In addition, an ‘operator’ may be subject to other legal obligations under the Act, including registration and notification requirements.

Accordingly, for the purposes of this article, the overview of the congestion levy will not go into any detail on the application of the Act to an ‘operator’ of a ‘public car park’ as defined under the Act.

Solicitors need to be aware that the Act is broad and includes motor vehicle parking that is clearly marked, as well as areas on land that are set aside or used for motor vehicle parking that have no clear markings or delineation. Consequently, the Act can deem the number of parking spaces.

For example, where parking spaces cannot be easily counted because they are unmarked, section 5 of the Act prescribes an area method of calculating the deemed number of parking spaces on a property.

Under Part 4 of the Act, certain uses of the parking space may be exempt from the congestion levy. Some examples are where the use of the parking space is:

• Used exclusively and for no charge by
  • “a client, patient or consultant of the person who provides the parking space” (for example, a medical practice setting, not customer parking in a retail setting)
  • “a person who is providing maintenance services to the owner or occupier of the premises on which the parking space is located”
  • “a person who is visiting the premises on which the parking space is located, unless those premises are the person's usual place of business or work (this exemption does not apply to customer parking and the delineation between “visitor” and “customer” parking is not always easily drawn)
  • “by a person engaged in loading or unloading goods or passengers.”
    See section 17(1) of the Act.
• Located on premises that are owned by a municipal council, religious body, charitable or public benevolent institution, hospital, university, library or museum, and no charge is made for the parking of a motor vehicle in the space – see section 18 of the Act
• “set aside or used exclusively for the parking of a motor vehicle displaying a disabled person's parking authority” – see section 21 of the Act
• “used only for the parking of motor vehicles by employees of a 24/7 enterprise who are regularly rostered on to work shifts at the 24/7 enterprise while the employees work such shifts” – see section 22 of the Act.

Landowners need to be aware that the SRO audits the use of the parking spaces against any claimed exemption. An owner may be liable for unpaid congestion levy liabilities, penalties, and interest as a result of an SRO audit, where a disabled parking space was claimed as exempt, but was in fact used as a business employee’s private parking space, and that business employee did not have nor display a disabled person’s parking authority (permit) on their motor vehicle.

This list of congestion levy exemptions above is not exhaustive and further information on the exemptions can be found on the SRO’s webpage understanding exemptions and concessions and Part 4 of the Act.

For information on claiming a congestion levy exemption, please refer to the SRO webpage claim a levy exemption.

What parking spaces qualify for a concession?

Under section 25 and section 26 of the Act, an owner of a parking space subject to the congestion levy may be eligible for a concession where the parking space is not capable of being used or does not exist as a parking space in the preceding year.

An example of a potential concession might be where the parking space was unavailable for use for a period during a calendar year due to building works preventing the parking space from being used. In this instance the owner of the parking space may be eligible to apply to the SRO for a concession on the congestion levy for the next year.

Since 1 January 2026, under section 26A of the Act, certain parking spaces that are located in a Category 2 levy area that are on, or adjacent to retail premises or retail shopping centres, may be eligible for a 50% concession on the congestion levy. However, eligibility for this concession is subject to:

• The parking space being provided to customers free of charge, if the customers make a purchase at the retail premises or the retail shopping centre, or
• the period of free parking being less than 1 hour, and
• the relevant parking space being used exclusively for customers attending the retail premises or the retail shopping centre (i.e. does not include employee parking).

For more information about available concessions to the congestion levy, please refer to the SRO webpage understanding exemptions and concessions and Part 4 of the Act.

For information on claiming a congestion levy concession, please refer to the SRO webpage claim a levy concession.

Notifications to the SRO about the change of ownership of parking spaces are typically not required for parking spaces used exclusively for residential purposes.

However, if the land includes any parking spaces that are subject to the Act (not used exclusively for residential purposes), then a purchaser of the land must notify the SRO to register as a parking space owner, within 1 month of becoming the owner of any parking spaces. Failing to do so attracts a penalty of 60 penalty units.

Once an owner of land has registered with the SRO that their land is subject to the congestion levy, the SRO then provides the owner of the land with an annual return form to complete. The owner must disclose the number of parking spaces set aside or used for motor vehicle parking (including any deemed parking spaces under section 5 of the Act) and return the annual return form to the SRO by the due date. The annual return form also permits the owner to apply for any applicable exemptions or concessions to the congestion levy.

Conversely, a vendor selling land that includes parking spaces subject to the Act, must notify the SRO within 1 month after ceasing to be the owner. Failing to do so also attracts a penalty of 60 penalty units.

In the situation where a vendor has failed to notify the SRO of parking spaces subject to the congestion levy regime (when the vendor initially acquired the parking spaces), solicitors should warn the vendor client in writing about the consequences of failing to comply with the Act, and suggest that the vendor considers making a voluntary disclosure to the SRO of any existing unassessed liabilities for the congestion levy (i.e. where assessments have not issued due to failure to register or disclose the correct number of parking spaces).

In addition, solicitors facing this situation should also consider the implications of non-disclosure of any parking spaces to the SRO, and how that may impact the sale of the land and parking spaces to any purchaser. In turn, solicitors should provide the appropriate advice to the vendor client prior to the execution of the section 32 statement and contract of sale of land.

For more information on the registration requirements please refer to section 27 and section 28 of the Act, and the SRO’s webpage, register as a car park owner or operator.

For further information on the notification requirements, please refer to section 30 of the Act, and the SRO’s webpage, change your owner/operator details.

When selling land subject to the congestion levy, vendors are required to disclose the total annual congestion levy liability applicable to the land in the section 32 statement.

The LPLC has seen claims arising where the vendor failed to disclose the congestion levy in the section 32 statement, and subsequently the purchaser terminated the contract of sale of land under section 32K of the Sale of Land Act 1962 (Vic).

Mitigating this risk is not straightforward. Currently, there is no property certificate that can be ordered from the SRO that gives details of the congestion levy liability of a property. Accordingly, when acting for vendors in the preparation of section 32 statements, solicitors need to obtain a copy of the client’s most recent congestion levy notice from the SRO and ensure that the congestion levy liability is correctly disclosed in the section 32 statement.

The following steps may assist solicitors to identify and manage congestion levy risks in conveyancing transactions.

When acting for vendors

• Identify whether any parking spaces set aside or used for motor vehicle parking (including unmarked areas) are leviable by checking the SRO congestion levy map.
• Obtain the client’s SRO congestion levy notice and disclose the levy in the section 32 statement.
• Advise the vendor that they must notify the SRO within 1 month of settlement.
• Consider whether voluntary disclosure is needed for any undisclosed or unassessed parking spaces.
• If you are retained by the client to notify the SRO that the vendor no longer owns the parking spaces after settlement, ensure this task forms part of your workflow and is diarised.
• Be clear whether congestion levy advice and notifying the SRO sit inside or outside your conveyancing retainer.

When acting for purchasers

• Check the SRO congestion levy map to see whether the land is in a congestion levy area, identify the number and nature of parking spaces, and confirm if the annual congestion levy liability is disclosed in the section 32 statement.
• Remind the purchaser that areas of the property that do not contain marked parking space lines but are set aside or used for parking must be disclosed in accordance with section 5 of the Act.
• Advise the purchaser they will become liable for the congestion levy and must register with the SRO within 1 month after settlement. If you are retained to do this, ensure that this task forms part of your conveyancing workflow and is diarised.
• Be clear whether congestion levy advice and notifying the SRO sits inside or outside your conveyancing retainer.

Example paragraph for purchaser advice for non-residential property (amend as required)

“The property includes areas that may constitute off‑street parking spaces within the congestion levy area. The congestion levy is an annual charge calculated per parking space. ‘Parking spaces’ under the congestion levy regime include marked or unmarked areas of the property that are either used or set aside for motor vehicles. The congestion levy is then assessed on the number of parking spaces that property had in the prior calendar year.

The vendor has disclosed the current annual congestion levy amount as [insert].

If you proceed with the purchase, as the owner you must register with the State Revenue Office (and provide the required details, including the number of parking spaces) within 1 month of settlement; penalties (currently 60 penalty units) apply for non‑compliance.

Once you have registered as a parking space owner, the State Revenue Office will provide you with an annual return form to complete. You must disclose the number of parking spaces used or set aside for motor vehicles (including any unmarked areas of the land that are set aside or used as parking spaces). The annual return form also permits you to apply for any applicable exemptions or concessions to the congestion levy. These concessions may require supporting records.”

Example paragraph for an initial letter to a vendor for non-residential property (amend as required)

“There are parking spaces that are subject to the congestion levy, and you are liable for the congestion levy of $[X]pa for each space. You have provided us with a copy of your most recent annual congestion levy notice, which will be disclosed in the section 32 statement. Under the Sale of Land Act 1962 (Vic), it is critical that the congestion levy is correctly disclosed in the section 32 statement. Otherwise, the purchaser may have a right to terminate the contract of sale of land and receive a refund of the deposit any time prior to settlement.

Consequently, it is important that you check and confirm that the congestion levy liability disclosed in the section 32 statement is correct. If there are any errors, please contact us before you sign the section 32 statement.

In addition, if you have not disclosed to the State Revenue Office (‘SRO’) any parking space that should be subject to the congestion levy, please contact us immediately as this could expose you to a dispute with the purchaser or penalties from the SRO.”

Vendor

• For non-residential properties,
  • Does the property include any off‑street parking, including unmarked, paved or hardstand areas, that is used or set aside for parking?
  • For each parking space or area, who used it in the prior calendar year (staff, customers, visitors, contractors, tenants)? Was any fee charged?
  • If the congestion levy applies, please provide the most recent SRO congestion levy assessment.

• Are any residential parking spaces leased to third parties? If yes, provide details.
  
  

Purchaser

• For non-residential properties,
  • Does the property include any off‑street parking, including unmarked, paved or hardstand areas, used or set aside for parking?
  • For each parking space or area, who used it in the prior calendar year (staff, customers, visitors, contractors, tenants)? Was any fee charged?

• For residential spaces, were any parking spaces leased to third parties, or do you plan to do this? If yes, provide details.

For further information on the congestion levy, solicitors can visit the SRO’s webpage on the congestion levy.