The Abbott government has signalled it will recover any interest earned on the $1bn early payment it is making to the Victorian government for the second stage of the East West Link project.

Labor raised questions on the decision to provide the $1bn by 30 June, as officials confirmed the Victorian government was yet to provide Infrastructure Australia with a full business case and work was not due to begin until late 2015.

The East West Link is an 18km road project in Melbourne connecting the Eastern Freeway to the Western Ring Road.

The federal Coalition promised before the election to contribute $1.5bn to stage one, but Tony Abbott announced last month the government would pour an extra $1.5bn into stage two.

Officials revealed at a budget estimates committee hearing on Monday that the majority of the extra $1.5bn was due to begin flowing to the Victorian government before 30 June.

The initial $1bn commonwealth contribution in 2013-14 would be followed by four years of no federal funding, and then $500m in 2018-19.

Labor's transport spokesman, Anthony Albanese, said it was extraordinary to see “a billion dollars just being put into a bank account for a project that won’t even be commenced for years”.

Albanese said the early payment defied the government's rhetoric about a budget emergency and the need to be careful with taxpayers' money.

“The funding profile of a billion dollars being giving this financial year prior to June 30 must be seen as providing assistance to their friends in the Victorian government,” he said.

“The only thing that that billion dollars will produce before it starts, if it ever does, if it ever has a business case, if it ever gets environmental approval sometime after 2015-16, is interest to the Victorian government – interest lost for the Australian government.

“Joe Hockey and Mathias Cormann have to explain why it is, after last week’s horror budget, they’re putting a billion dollars into someone else’s bank account for no production whatsoever.”

A spokesman for the deputy prime minister and minister for infrastructure, Warren Truss, said the federal funding was “contingent on the Victorian government submitting an updated business case to Infrastructure Australia for consideration in its 2014 infrastructure priority list, and commencement of work by the end of 2015”.

“The Victorian government has provided an interim business case on the western section to Infrastructure Australia,” he said.

“There are mechanisms in place in agreements with the states that ensure that any interest accrued on loans or payments to the states are remitted back to the commonwealth.”

The spokesman did not directly answer whether the $1bn would be transferred to the Victorian government before or after the full business case had been received and assessed by Infrastructure Australia, the national infrastructure advisory body.

“The upfront money will be given to the Victorian government so they can get going on the project,” Truss's spokesman said.

The issue was raised at the Senate estimates committee hearing on Tuesday.

The Department of Infrastructure and Regional Development’s secretary, Mike Mrdak, said the government was keen to “see the acceleration of this project” and the $1bn payment was due to be made this financial year.

“The final funding arrangements are subject to the provision of the business plan. It's not clear whether the business plan will be available before 30 June,” Mrdak said.

Infrastructure Australia's acting infrastructure coordinator, John Fitzgerald, said the material provided by Victoria shortly before the federal budget was “very early, very high-level information” which he described as “conceptual”.

“There's significantly more information that we would require for it to be a full business case,” said Fitzgerald, who also dismissed conflict-of-interest claims stemming from his past work for the Victorian government.

Albanese said the government should consider independent analysis from Infrastructure Australia before deciding where to allocate funding to ensure the dollars delivered the greater productivity benefit.

Abbott was directly asked at a media conference on 29 April why he was committing the money when the business case was yet to be completed and Infrastructure Australia had identified higher priorities.

He said the published business case summary for stage one showed it was “clearly economically beneficial infrastructure” and he was “confident that the full business case, when we get it from the Victorian government, will show at least the same level of economic benefits” from stage two.

“If we are going to do the first half, let's get on with things and build the second half so that we aren't reducing the missing link – we are eliminating the missing link,” Abbott said at a joint media conference to announce the funding.

“We aren't just moving the traffic jams – we are doing our best to end the traffic jams by eliminating the No 1 choke point from Melbourne's road system.”

The Victorian Liberal premier, Denis Napthine, said East West Link was “a game-changing project” that would “make a real difference to all Victorians and to the economy of this great state”.