The bill to legalise Uber in Victoria was finally passed on Thursday after the state government accepted upper house amendments including the halving of the previously proposed $2 levy.

“The reforms create a level playing field for taxis to compete with ride-sharing services and will encourage new operators to enter the market,” said Public Transport Minister Jacinta Allan.

The $1 levy on all commercial vehicle trips will come into effect next year, replacing licence fees and helping compensate taxi operators.

From 2018 all ride-share drivers will be required to be accredited, while the government will buy back licences from taxi drivers wanting to exit the industry.

Taxi drivers will receive $100,000 for a first licence and $50,000 each for up to three additional licences, while the $50 million cap has been removed from the government fairness fund to ensure all eligible applications receive payments.

Uber in a statement said it was pleased to see the “important reforms” passed “for the benefit of the travelling public, drivers, and the industry as a whole”.

Taxi union representatives, however, are still angered by the government’s decision to legalise the app and deem the amount of compensation for their licences unfair and poorly implemented.