Splitting the project would allow work on the first segment to begin before the government gets Commonwealth approval for the later stages, which would cross the lake and go through the Parliamentary Zone.

It will submit two Environment Protection and Biodiversity Conservation Act referrals to the federal government for approval, while it expects to complete a business case later in the year.

One referral will be for stage 2A which would run from Alinga Street to Commonwealth Park, while the second referral would be for stage 2B which would start at Commonwealth Park, travel via State Circle, and finish at Woden.

The decision to split the project was was made so construction could start as soon as possible, with the heritage and environmental concerns for stage 2B expected to be far more complex and requiring additional National Capital Authority and Federal Parliament approvals.

While the government intends and expects to be able to cross at Commonwealth Avenue Bridge, it says stage 2A would be capable of standing on its own should approvals fall over.

Transport Minister Chris Steel said construction on the first stage could, depending on the approval process, start as early as next year and be operational by 2023. The earliest the government expects the completed stage two light rail to be taking passengers is 2025.

Mr Steel said the separate referrals were appropriate given the very different planning, heritage and environmental considerations in different parts of the corridor.

"We hope through this approvals process, we can get on with the first segment between the city and Commonwealth Park more quickly while we continue to work with the Commonwealth on the approval for remaining part of the route to Woden," he said.

"With stage one of light rail construction at completion next month, we have the skills and expertise in the city for work to begin on the next stage as soon as possible.

"We are aiming to ensure that complexities in the Commonwealth Park to Woden alignment can be worked through properly with the Commonwealth but without holding up work on the extension of light rail between the city and Commonwealth Park."

A 3D virtual tour of the proposed second stage published by Transport ACT.

Mr Steel said the route passing through the Parliamentary Zone via State Circle had complex considerations, such as the approach to Commonwealth Avenue Bridge and crossing the lake towards Parliament House. "It is likely these matters will take longer to resolve with the Commonwealth," he said.

After the Environment Protection and Biodiversity Conservation Act referral, the environment minister has 20 days to decide if a formal environmental impact assessment is required.

The ACT government will then prepare a draft environmental impact statement - based on guidelines issued by the Environment Department for the project - which will be released for public comment.

A final environmental impact statement will then be assessed by the department, which will provide a recommendation report to the minister.

The minister must then decide whether to approve the project within 40 days of receiving the final environmental impact statement.

The government earlier this year abandoned plans to take the second stage of light rail past Old Parliament House, after a Federal Parliament committee warned of delays in approvals if it chose that route.