User Pay Systems: The Hidden Tax Drowning Victorians

Victoria’s cost of living crisis isn’t just about inflation at the supermarket, it’s also about the quiet spread of “user pays” expanding like a cancer into almost every bill we get. From toll roads and rego to council rates, waste, power and even local sports facilities, Victorians are being asked to pay service fees on top of taxes that supposedly already fund these services.

At the same time, state debt is climbing towards eye watering levels and households have nowhere to hide.

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When did the User Pay era commence and what is it's impact on the West Gate Tunnel

User pays isn’t brand new. Economists and governments across Australia embraced it during the wave of micro economic reforms in the 1980s and 1990s, when policy shifted towards making people pay directly for the services they use. (foot note, this is when the housing market began to destabilise)

In Victoria, one of the clearest turning points was the move to privately operated toll roads. CityLink the now infamous 22km network linking the Tullamarine, West Gate and Monash freeways was formally approved in the mid 1990s with a private concession awarded in 1995. It opened in stages from 1999, using fully electronic tolling.

Importantly, existing public freeways already paid for were folded into the project and then tolled (an under the table sell off of a public asset), something the CityLink history itself raises and which attracted heavy criticism at the time.

EastLink followed, opening to traffic on 29 June 2008 under a public private partnership (PPP) model, with tolls starting after a short toll free period.

These projects normalised the idea that core infrastructure which is mandatory for governments to provide and we are already taxed for, could be financed by private operators charging ongoing user fees, rather than simply being provided from tax revenue.

Today, the same model is applied to the delayed and over budget West Gate Tunnel, which will also be operated by a private toll company. Which is why the Victorian Premier isn’t to worried about the cost blow out. We’re going to pay for it multiple times via tax, tolls and fees. It will just mean our kids, kids will also still be paying it off.

It is also important to note, it is the working class suburbs that are most disadvantaged and who already suffer from lower than average wages who continue to lose the most in a user pay system.

Fees on bills that are already a fee for service

The user pays system has since illogically been applied into all things including household bills across the board. Which when put under scrutiny make absolutely no sense and how the Australian Competition and Consumer Commission (ACCC) has sat silent as they expand unchecked needs an inquiry in itself.

Let's just run through a few of the stand out examples that the ACCC should be onto, unless the entire commission doesn't have a human and is a government front for pretending to care. It is unlikely that no one at the ACCC themselves experiences this. That or their being paid too much to notice.

• Power bills: usage plus “just to be connected”

• Usage charges – cents per kWh

• A daily supply charge – a fixed fee just to be connected to the grid, no matter how little you use.

Just an FYI utilities are a must in order for Governments to meet their legal obligations on their citizens, so charging a fee to remain connected is one of the biggest what the moments!

Comparison sites show the average residential electricity bill in Melbourne is about AUD 455 per quarter and that figure includes a daily supply charge baked in. On top of that, regulators have recently allowed increases in the Victorian Default Offer, nudging power bills higher again for hundreds of thousands of households already under pressure.

So we pay for:

• The Energy We Use
• A fixed daily fee for the privilege of having an account
• GST ontop of Both

For many households, that supply charge feels like a service fee sitting on top of what is already a fee for service.

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Local Governments A Growing Pain Point For All Victorians

Local governments are steadily shifting parts of their operations onto explicit user pays models. With communities like City Of Melton which is a growth corridor much of their basic services are not being delivered despite the municipality being one of the richest in Victoria.

Residents are unable to even freely travel their communities or access basic infrastructure providing an absolute nightmare for people who live in these communities. The council fails on multiple fronts but continues to state it is delivering.

Victorian councils traditionally rely on property based rates, which are not strictly user pays. But increasingly they bolt on separate service charges. The Victorian Government’s own guidelines encourage councils to use service charges (not just rates) for waste, recycling and resource recovery, precisely because they align charges to the cost of delivering that specific service.

City of Greater Geelong, for example now lists a waste service fee on rates notices that is “based on user pays principles” and recovers costs including collection, recycling, landfill and the state landfill levy.

Moira Shire’s waste strategy states plainly that user-pays principles will apply and that fees and charges should incorporate full lifecycle costs of waste services.

That means a household will pay:

• Council Rates
• An additional waste charge
• Tip fees
• State taxes for waste management
• State taxes for environmental elements of waste management

And that is only on waste, roads and infrastructure and developer contributions are a bigger problem. Hint: The humble Avocado isn't the reason why you can't afford a house. It is the Victorian Government.

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Victoria: The Place To Quadruple Dip On Taxes

The west gate tunnel has been a major feature of this current regime but, the cost blow outs have now seen the debt on sold to the private sector so once again the states most disadvantaged community (the working class) will lose the most.

Roads are also where the layering of charges becomes impossible to ignore.

Taxes and Rego
Australian motorists already pay a Fuel excise currently 51.6c per litre, plus GST on the fuel itself and Vehicle registration fees and a TAC insurance component in Victoria.

Fuel excise started life as a way to help fund road infrastructure and even today motoring bodies and policy analysts talk about fuel excise and rego as key revenue sources for road funding.

On top of those taxes, a growing proportion of urban trips in Melbourne now use toll roads operated by private companies, including:

• Transurban
• connect east

These tolls are explicit service fees for using what are seen as basic road infrastructure and required to enable our ability to participate in life and earn an income. To make matters worse, many CityLink users are now paying tolls on sections that were once free public roads but were folded into the CityLink concession and retolled, which was controversial from the very start.

Public assets were not sold but given to a private firm to charge us on what we already paid for. The ACCC? Crickets.

Goods and Services Tax (GST)

EastLink’s own tolling information explains that it calculates a GST exclusive total, then applies GST to the final bill.

So a Melbourne drive pays for Fuel Excise + GST, Annual TAC and rego and user pay fees + GST, Tolls to use roads + GST, Tolls on public roads + GST plus the supplement of FEDERAL GOVERNMENT Funding which is derived from our tax.

That is exactly the sort of stacked user pay model that feeds the “cost of living blowout” driven by policy choices and political decisions not economic issues.

Local Governments Feeding into the pressure

Beyond waste, councils are moving more services onto separate fee schedules such as paid parking, sporting ground hire, animal registrations, fines, permits and more. The Victorian Local Government sector acknowledges that rate revenue is only part of the picture, with fees and charges making up a growing share of council income even while rates are not a pure user pays mechanism.

For residents, the lived reality is simple almost every interaction with local government now seems to attract another cost such as a permit fee here, a facility hire charge there, a waste levy on top of already rising rates, additional land costs to cover basic infrastructure we have already paid for via taxes. By the time we purchase a home in Melbourne a Victorian has paid for the road in front of their home 5X which is leading to increased housing costs.

Victoria Buckles Under Uncontrollable Debt

All of this is happening against a backdrop of historic state debt. The Victorian Parliamentary Budget Office projects net debt rising from $133.2 billion in June 2024 to $187.3 billion by June 2028, an average growth of nearly 9% a year. With independent and media analysis of the 2025 budget suggests net debt will push towards $194 billion by 2028-29, with annual interest payments heading for around $10–10.6 billion a year.

In other words, while households are told that user pays tolls, fees and charges are necessary to keep the state’s finances “sustainable”, debt is still rising and the interest bill alone will soon rival entire departmental budgets. For ordinary Victorians, there’s a strong sense that they are paying more and more but the state’s balance sheet is still getting worse.

There’s hard data showing just how much people are hurting:

A national survey cited by Suicide Prevention Australia found 54% of Victorians reporting cost-of-living and personal debt distress above normal levels the biggest jump in financial distress of any state over 18 months.

The Victorian Greens’ own regional cost of living survey described a “heartbreaking picture” of regional Victorians struggling to afford rent, bills, food and healthcare. Food relief providers across regional Victoria report demand for help has soared, with some services seeing volumes rise from one tonne of food a day in 2021 to ten tonnes a day in 2023.

Even the government’s own budget papers now openly acknowledge that Victorians “have seen the cost of food, fuel, utilities, insurance and their mortgage and rents rise” and are struggling to stay afloat.

The frustration comes from the fact there’s no real recourse:

• You can’t opt out of fuel excise or GST.
• You can’t avoid rego if you need a car.
• You can’t shop around for a different council.
• You can't not pay tolls
• You can't opt in and out of which user pay system you use

It is no longer a user pay system but a tax pretending to be optional yet the ACCC is not acting

Victorians will keep feeling the pinch every time another “service fee” (TAX) appears on a bill that was already supposed to be a fee for service.

image sources provided supplemented by Canva Pro Subscription. This is not financial advice and readers are advised to undertake their own research or seek professional financial advice

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