A long-awaited review of Sydney's tolling system has called on the government to lower tolls for most motorists but impose two-way tolls on harbour crossings.

The Independent Toll Review, overseen by former Australian Competition and Consumer Commission (ACCC) chairman Allan Fels has been officially handed to the government.

Under the new system, motorists would be charged per kilometre, but that charge would reduce for each additional kilometre travelled.

There would also be an additional "infrastructure charge" on some trips which benefit from expensive infrastructure components like ventilated tunnels and the Harbour Bridge.

The review has proposed an across-the-board price reduction on top of the restructure.

That would mean trips between Penrith or Parramatta and the CBD could become almost $5 cheaper each way, and trips from Campbelltown could fall by more than $13.

Christmas deadline for toll deal

It also called on the government to introduce immediate legislation to set up NSW Motorways, a state-owned body to control tolls.

It would have the power to set prices for tolls, with oversight from the Independent Pricing and Regulatory Tribunal (IPART).

Professor Fels said that would enable the government to push back on toll road operators like Transurban if they are not on board with the reforms.

"It should have the legislation ready in its hand and if an agreement is not reached by Christmas, the government should be ready to use its legislative power," he said.

He said Transurban would not lose out in the long run, as motorists turn to non-tolled roads due to the high costs.

"The legitimacy, the social licence of the underlying system will dissipate without these reforms," Professor Fels said.

The report recommended the phase-out of toll relief schemes in the restructure.

"Current toll relief schemes are inadequately targeted and under-utilised, in part due to overly complex administration," the report's summary said.

'Strong case' for two-way tolling on harbour crossings

Roads Minister John Graham ruled out scrapping toll relief, but said he was open to the other reforms detailed in the report.

"I welcome the offer by motorway concessionaires to work with the government on a new, network approach to tolling," Mr Graham said.

He said the report made a "strong case" for two-way tolling on harbour crossings and the Eastern Distributor.

Mr Graham said the government was open to legislation to control toll pricing but would first see to negotiate with operators like Transurban for reform.

In a statement, Transurban CEO Michelle Jablko said the company would work with the government to improve services and "protect the $36 billion that concessionaires have invested in the state's motorways".

"The government has made it clear contracts will be honoured and that its preferred pathway to reform is working with concessionaires to find a solution," Ms Jablko said.

"We are pleased that many of the working options could be key elements of the solution."