As outlined in the 2021 SRL Business and Investment Case, SRL East will be funded from three sources:
- $11.5 billion from the Victorian Government
- $11.5 billion from the Commonwealth Government
- $11.5 billion raised through value capture.
None of the value capture mechanisms will directly apply to the family home.
Value capture is based on the simple principle that those who directly benefit from a project should contribute proportionally to its cost.
Increases in property value will naturally follow as the connectivity, productivity and liveability improvements created by SRL attract new businesses and residents.
SRL value capture measures will apply in the six SRL East precincts. The revenue from these five value capture mechanisms will repay up-front state borrowing over a 40-year period.
Value capture has been used successfully to help fund major infrastructure projects across Australia and around the world.
In the UK, the Mayoral Community Infrastructure Levy (MCIL) is a charge on developers that recovers part of the cost of delivering London’s Crossrail (also known as the Elizabeth Line).
The charges are based on the net additional floorspace of a development. A 2023 report on the levy concluded it did not have any discernible adverse impact on development activity in London.
Queensland imposes the Transport Improvement Levy, a supplementary charge on municipal rates used to fund the Gold Coast light rail project.
In the ACT, Lease Variation Charges apply to developments benefiting from policy changes that enable them to develop land at higher densities.
In New South Wales, the State Government imposes a parking space levy payable by owners of off-street car parks that funds improvements to public transport infrastructure and services.
Value capture measures will not be directly applied to people’s principal place of residence.
For example, Jim and Sam’s home is in the Cheltenham SRL precinct. As the property is their family home there will be no changes for them. The exemptions associated with principal places of residence exemption will continue to apply. This means, as homeowners, Jim and Sam will continue to be exempt from paying land tax. If the land was rezoned, Jim and Sam would also be generally eligible for the residential land exemption from Windfall gains tax.
They won’t have to pay the SRL Infrastructure Contributions Plan levy either, unless they build an additional dwelling on their property.
Above and beyond the connectivity benefits they will enjoy when SRL is complete, Jim and Sam may see their property value increase as has happened in properties near similar developments across Australia and internationally.
Landowners will continue to pay the same land tax rates that already apply to the total value of taxable land owned in Victoria, excluding exempt properties like the family home.
For example, Philippa owns an investment property within the Clayton SRL precinct and rents that property to tenants. There will be no changes for Philippa. She will continue to pay the same land tax rates that already apply to the total value of taxable land owned in Victoria, excluding exempt properties like the family home. Land tax applies to residential investment properties, commercial or industrial properties and vacant land.
Developers will be subject to land tax and the one-off Infrastructure Contributions Plan levy to help fund the construction of the SRL and other new infrastructure including roads, footpaths and open spaces. For example, Developer X is building a block of apartments in the Box Hill SRL precinct to capitalise on increased demand for apartments in this transport and commercial hub at the heart of the SRL East. If Developer X owns the land where the apartment block will be located and has benefited from a rezoning of the land, Windfall gains tax may also apply.
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