Melbourne's metropolitan rail network will expand to the growing northern suburbs with the 2009 State Budget to commit $562.3 million to build a rail extension of the Epping line to South Morang.

The Premier John Brumby today said with funding now committed, tenders for the South Morang Rail Extension project would be called later this year and construction would start in 2010.

"Our Government is taking action to build a world-class transport network as we deliver our $38 billion Victorian Transport Plan," Mr Brumby said.

"The South Morang Rail Extension is about putting the infrastructure in place to cater for the 90,000 people expected to settle in the Plenty Valley growth area and importantly, it will deliver jobs now, securing up to 460 jobs during construction.

"The new rail extension will give people living and working in the outer north better access to employment opportunities by providing a direct link to the recently completed redevelopment of the Plenty Town Centre.

"This is an exciting time for communities in the outer north. Design and development for the South Morang rail extension is on track, tenders will be called later this year and construction will begin next year and be completed in three years."

The South Morang Rail Extension Project involves the duplication of a single track between Keon Park and Epping and the construction of 3.5 kilometres of new double track from Epping to South Morang.

The $562.3 million in the 2009 State Budget will fund all capital and construction works associated with the project. There will be ongoing operational costs.

Public Transport Minister Lynne Kosky said there would be no new level crossings as a result of the extension, delivering on the Brumby Government's commitment to build no new level crossings in rail line extensions.

"The project design work has determined that the most appropriate solutions will involve a rail overpass at Dalton Road, as well as road overpasses will be built at Pindari Avenue and Civic Drive," Ms Kosky said.

"The new South Morang station will have parking for 500 cars, be integrated with local bus routes and include a safe drop off area and a taxi rank. It will also feature a bike cage, allowing local residents to ride their bike and keep it secure."

Member for Mill Park Lily D'Ambrosio said the South Morang Rail Extension project would mean communities in the outer north would be able to spend less time commuting and more time with family and friends.

"I am delighted to see this project move forward and I know communities in this region are looking forward to being better connected," Ms D'Ambrosio said.

Member for Yan Yean Danielle Green said the project's next step would be community engagement.

"Local residents will receive letters with information about the project and the community will be invited to come along to a series of information sessions to view these early designs and speak directly with the project team," Ms Green said.

Member for Thomastown Peter Batchelor said residents of Epping and Thomastown would also benefit with station upgrades planned as part of the South Morang Rail project.

"This project is great news for people living and working in Epping and Thomastown who will access to significantly improved railway stations, including better disability access," Mr Batchelor said.

The South Morang Rail Extension project is due for completion in 2013.