SYDNEY'S original tollway between Penrith and Concord, the M4, will this month lift its toll for the first time in eight years to $2.75.

The motorway is the cheapest in Sydney, with the toll at present $2.20 for 40 kilometres. But for an increasing number of motorists who use the busy artery, the road costs nothing at all.

Under the Cashback scheme, the full cost of the toll on both the M4 and M5 is reimbursed by the State Government for any privately registered vehicle.

It is the NSW Treasury that will most likely feel the biggest impact from the toll increase of 55 cents.

The scheme was instituted by the former Premier Bob Carr, who while in opposition, had promised to scrap tolls on both motorways. But on coming to power he instead announced the Government would repay motorists the tolls upon application, after discovering a tax liability made its plans for a "shadow toll" too costly.

Cabinet papers released to the Herald earlier this year showed the Carr government knew in October 1996, when it announced Cashback, that it might cost taxpayers $962 million by 2010 when the concession expires.

The toll rise is authorised under the deal between the M4 operator, Statewide Roads, and the NSW Government, which allows increases linked to the consumer price index. But the original deed, signed in 1989, forced the road operator to hold back from increasing the CPI-indexed toll until the increases had accumulated to a minimum of 50 cents.

As the road still has cash booths, the toll increases must be in larger increments that cater to coins.

The latest 55-cent increase, which is only the second in the road's history, takes effect from August 23.