Car registration labels will be abolished in Victoria from the start of next year.

Premier Denis Napthine says the labels are outdated and will be scrapped as of January 1.

He says the reform will save Victorians up to $20 million per year.

"There are 44,000 Victorians each year who have to get another registration sticker because of a broken windscreen (or) the sticker falls off," said Dr Napthine.

"So all of that is a cost and a hassle, and all that cost and hassle will be taken away by abolishing the registration sticker."

Minister for Roads Terry Mulder says businesses will also benefit.

"Fleet operators in particular won't have to go down the pathway of calling vehicles in, calling drivers in for what is an extremely expensive and tedious operation," he said.

But Opposition leader Daniel Andrews has questioned the benefit of the policy for Victorians.

"If these systems are about savings, if they're about efficiency, if they're about cutting the costs to government, why has the cost to motorists gone up to more than $700 per year?" said Mr Andrews.