The Real Cost of Doing Business in Victoria

If you’re a small or medium business owner in Victoria, especially in Melbourne, you’re probably feeling like everything costs more now than it did yesterday. And you’re right. Between new state taxes, expanded levies, skyrocketing commercial rent and hidden overheads, the cost of doing business in Victoria in 2026 is squeezing margins harder than most business owners expected.

It’s not just perception. The numbers really back it up.

Victoria’s Labor Government has introduced a slew of new, expanded or restructured taxes and levies since 2021 that are directly hitting businesses’ bottom lines. At the same time, commercial rent and residential cost pressures are indirectly inflating wage demands and operating costs.

For business owners trying to make sense of it all, here’s a straight breakdown of what’s changed and how much it actually costs now?

The Hard Numbers: What Businesses Really Pay in 2026

If you’re scratching your head about why everything seems more expensive, here’s a snapshot of the increased costs hitting Victorian businesses:

Payroll Tax & Surcharges

Standard payroll tax rate remains 4.85% on wages above $1,000,000 annual threshold.
Additional surcharges apply if national payroll > $10m:
• +0.5% Mental Health & Wellbeing Surcharge
• +0.5% COVID‑19 Debt Surcharge
→ Total potential surcharge = 1% on Victorian taxable wages above $10m.

Congestion Levy (from Jan 2026)

Introduced by the State Revenue Office in 2021 on private and public off-street car parking spaces in inner Melbourne. This is a significant cost to inner-city businesses, with a 73% increase in 2026.

Category 1: $3,030 per parking space (previously ~$1,750).
Category 2: $2,150 per parking space (previously ~$1,240).

Emergency Services & Volunteers Fund (ESVF)

Fixed charge on non‑residential land increasing to around $275 per annum, up from ~$267.

Short Stay Levy

A 7.5% levy on short‑stay accommodation platform revenue (introduced Jan 2025).

Vacant Residential Land Tax Expansion

Extended statewide from 2025–26 with escalating rates for land undeveloped 5+ years.
Applied to eligible mixed‑use land too.

Commercial Rent Increases

Commercial rents in Melbourne’s industrial and retail zones are rising, adding thousands in annual outgoings, particularly when property taxes & levies are passed through from landlord to tenant.

Victoria Residential Rent Growth (2020–2026)

Since early 2020, home rental prices across Melbourne have risen significantly. According to data, advertised rents in Melbourne increased by about 36% between 2020 and 2025.

To put this in perspective:

If the median rent in Melbourne was around $430 per week in 2020,
a 36% increase would put it close to $585 - $590+ per week in 2025 - 2026.

So overall, rents have climbed a whopping ~36 - 38% over the past five to six years, which is far ahead of typical wage growth and outstripping inflation.

This kind of rental growth places real upward pressure on wages, because employees factor housing affordability into their pay expectations - making labour cost one of the biggest ongoing challenges facing employers.

Insurance Premiums & Compliance Costs

While not direct government taxes, but liability, property, and business interruption insurance costs have spiked significantly in recent years, squeezing cash flow even further.

What This Means for Your Business

These aren’t small changes you can ignore:

A small business with two parking spaces in inner Melbourne could now pay over $4,000 extra a year just in congestion levies.
Large employers could be paying 1% extra in payroll surcharges on top of the base 4.85% tax.
Rent increases across industrial and retail are adding 5 - 10%+ to occupancy costs each year.

Add it all up, and running a business in Victoria now requires constant overhead auditing, aggressive planning and tight cost control - not just selling or marketing.

Victoria remains an engine of opportunity, but in 2026 the cost of doing business is a reality many owners are only just starting to fully grasp. The combination of tax layers, rent hikes and hidden charges means that margins are tighter, planning cycles are shorter, and one unplanned expense can quickly become critical.

If you’re reviewing costs, restructuring your workforce strategy, or questioning whether it’s time to tighten belts or pivot - you’re not alone. It might be time to do an audit on your expenses to see your true financial position in your business.

Because in 2026, manage costs first - revenue second may be the only viable growth strategy.

Death by a Thousand Levies?

The Real Cost of Doing Business in Victoria