Victoria's Government has announced plans to legalise Uber, which will also see taxi and ride-booking services hit with a $2 per trip levy.

The Government will establish a single registration system for taxis, hire cars and ride-share services.

Premier Daniel Andrews said the State Government would do away with taxi licences and provide $378 million to help existing licence holders transition to the new laws.

It was also setting up a $75 million "fairness fund" to assist those experiencing immediate financial hardship, with $25 million going to improve access for people with a disability.

The $2 trip levy will last for eight years and the money will be used to fund the changes.

Mr Andrews said the changes were about fairness.

"This is the most progressive, the most comprehensive reform agenda anywhere in the nation," Mr Andrews said.

"It's also the fairest and it provides everyone across Victoria the certainty that there will be more choice, there will be greater value, there will be better transport options for you, because we are making sure that the law is written to take advantage of the technology that's here now and all that will come hereafter.

"It gives to the taxi industry what they've been calling for, the chance to compete on an even playing field."

The Government also plans to address safety concerns and all drivers of taxis, hire cars and ride-booking services will have to pass police, driving and medical checks.

Only providers with cameras and fare meters will be able to pick up passengers who hail them down, or use taxi ranks.

Uber urges Government to justify $2 levy

Mr Andrews said the levy would be paid by the service provider which would be able to decide how much to pass on to users.

"It'll be up to them to then work out how they attribute that or how they spread that across all of their business," he said.

"It may well be less than $2 for a short trip, perhaps more than $2 for a long trip."

Uber Victoria general manager Matt Denman said the decision to regulate ride-booking recognised the positive role Uber played in the state.

He said more than 500,000 Victorians were already using the service.

Mr Denman would not say if Uber planned to fight the proposal or whether the trip levy would be passed on to passengers.

"Obviously we've just got the details of this reform package today," he said.

"Uber's position is that anything that makes transport more expensive is a bad thing for consumers.

"We would urge and ask the Government ... to provide a full justification and economic modelling for any proposed levy."

Mr Denman also refused to say if it meant drivers would have a lower take-home pay.

"Again, I'd reiterate that anything that makes transport more expensive is a bad thing for consumers."

Taxi industry welcomes broad reform, wants more detail

The Victorian Taxi Association said it supported the broad framework of the changes, but needed to understand the detail of the policy.

The association's David Samuel said they were only briefed on the changes last night.

"Ultimately we understand that the market and the world in which we exist is changing rapidly," he said.

"We need to adjust and adapt to that.

"We do want to ensure at the same time that we get fairness for our people, for our stakeholders, and for people who've invested heavily in this industry."

Only providers with cameras and fare meters will be able to use taxi ranks. ( ABC News )

The Government is planning to abolish taxi licences and pay out licence holders.

It will pay $100,000 for the first taxi licence and $50,000 for the second, but anyone holding more than two will miss out.

Mr Samuel said the majority of taxi licences were held by single owners.

"But there are those that own more and we are concerned for those people and we'll work with them and the Government to try to achieve an equitable outcome for everyone," he said.

"The $2 fee is a large one by all standards... however regulatory reform is necessary and that does come at a cost."

Victorian Opposition slams Government for new tax

The Opposition's David Hodgett said the levy was a new tax.

"Daniel Andrews went to the last election promising no new taxes, now he's going to slug Victorians with a $2 fee on every taxi and Uber ride," he said.

Mr Hodgett said the changes would have the biggest effect on people taking short trips, effectively adding $4 to the cost of a round trip.

"It's unfair, it's unjust," he said.

"Daniel Andrews is basically setting up a slush fund to buy the votes of the companies that hold these taxi plates and it's Victorians that are going to pay for this with this new tax on each and every Uber ride and taxi ride for the next eight years or beyond."

Mr Hodgett said the $2 fee was excessive, but would not say what would be a reasonable fee.

He welcomed the broader changes to de-regulate the taxi industry.

"On the surface I think the deregulation of the industry is a good thing," he said.

"For a long time now, 18 months, we've been saying to Daniel Andrews there's a need to regulate ride-sharing here.

"I think we welcome some of the changes, [but] we'd be interested in seeing the detail of them."