Ride-sharing services like Uber will be legalised in Victoria with existing taxi drivers to be compensated as the state government moves to create a single registration system for commercial passenger vehicles.
The government will buy back a single taxi licence for $100,000 and pay $50,000 for the second licence of owners with a so-called fairness fund providing $75 million of immediate hardship support.
An overall transition package worth $450 million will be funded in part by a $2 per trip levy on all commercial passenger vehicle providers.
"It may well be less than $2 for a short trip and perhaps more than $2 for a longer trip," Premier Daniel Andrews told reporters on Tuesday.
"It will be a matter for them (providers) and that will be another point of competitive difference."
All drivers - including Uber drivers - will have to be accredited by the Taxi Services Commission after passing police, medical and driving history checks and they'll be subject to ongoing criminal data matching.
Ride-sharing drivers who are accredited and install cameras and fare metres will be able to use taxi ranks and pick up hail passengers.
The knowledge test for drivers will be abolished with a new set of standards to be enforced by the taxi commission.
"It's been an ineffective tool at driving increased improvements in the standards of drivers," Transport Minister Jacinta Allan said on Tuesday of the knowledge test,
Draft legislation will be introduced into parliament this year with the Victorian government expecting the new system to be fully operational by early 2018.
Ms Allan says passengers will benefit from new players - like London-style cabs and cars specifically for women - entering the market, creating around 3500 jobs.
