New development levy framework introduced in Victoria

In brief

The Victorian Planning Minister has introduced legislation to implement a new development levy framework for the state. Developers and land owners in growth and strategic development areas will need to understand the new system of standard and supplementary levies, although much of the detail is still to come. Managing Associate Meg Lee explains.

Background

Local government and the development industry have long expressed concern that the current system of development contributions has become too onerous, costly and difficult to administer. The aim of the new system is to ensure that the planning and delivery of infrastructure is 'equitable, efficient and cost effective'.¹

The Planning and Environment Amendment (Infrastructure Contributions) Bill 2015 (Vic) (the Bill), introduced on 11 June 2015 by Planning Minister Richard Wynne, has its roots in a process commenced by the former Government over three years ago, with the establishment of the Standard Development Contributions Advisory Committee and the release of its two reports:² Report 1: Setting the Framework, and Report 2: Setting the Levies, together with a Government response to the reports, as well as a previous position paper developed in 2011, A New Victorian Development Contributions System – A Preferred Way Forward.

The previous Government had announced the new system in May 2014, with the stated intention that it would commence on 1 July 2015, but the legislation was never tabled. At that time, details of the proposed levies were set out on the then Department of Planning and Community Development website; however, these details have now been removed, following the introduction of the legislation into Parliament last week.

In short – what are the new levies?

The June 2015 Department publication Reforming Infrastructure Contributions that accompanied the Ministerial announcement sets out a summary of the new system and includes details that are not directly covered in detail by the Bill.

It states that the infrastructure levy will be used for local infrastructure, such as local roads, community centres, kindergartens, maternal and child health facilities, local parks and sporting facilities. It goes on to state that the infrastructure contributions can also fund some state infrastructure, such as public transport improvements.

It also states that the proposal is to introduce standard rates for residential, retail and commercial/industrial development for both metropolitan and non-metropolitan locations. However, the proposed rates are not set out in this publication (or anywhere at this stage).

The supplementary levy is proposed as an optional levy for use when the standard levy cannot adequately fund the required local infrastructure, or where additional infrastructure is required, such as state infrastructure in growth areas where the Growth Areas Infrastructure Contributions Scheme does not apply.

The levies are proposed to be applied to greenfield growth areas (land within the Urban Growth Zone or identified for growth in regional growth plans) and strategic development areas (locations within existing urban areas that have been identified in Plan Melbourne, including National Employment Clusters and Urban Renewal Areas) where there are no current development contributions plans

What does the new legislation do?

The Bill introduces a new Part 3AB into the Planning and Environment Act 1987 (Vic). The Bill sets out that, in addition to the items covered by section 6, a planning scheme may include one or more infrastructure contributions plans (ICP) for the purposes of levying contributions to fund:

• the provision of works, services and facilities in relation to the development of land in the area to which the ICP applies; and
• the reasonable costs and expenses incurred by the planning authority (excluding the Metropolitan Planning Authority) in preparing the ICP and any strategic plan or precinct structure plan relating to the ICP.

The levy may consist of either or both a standard levy or a supplementary levy.

The Bill sets out in the proposed new s 46GE of the Act numerous matters that must be included in an infrastructure contributions plan, including:

• ICP preparation costs;
• works services and facilities to be funded by the ICP (including those funded through the standard levy and any to be funded by the supplementary levy) and any staging of those works, services or facilities;
• the classes of development of land for which an infrastructure levy is payable, including where differential rates are payable for different classes of development of land;
• how the need for the facilities relates to the proposed development of land in the area;
• method and timing of annual indexation to be applied to the estimated costs of each of the works, services or facilities to be funded through each of the levies;
• details for the collecting agency (a Minister, public authority or municipal council to whom the levy is payable); and
• details for the development agency (a Minister, public authority or municipal council responsible for the provision of the works, services or facilities).

The Bill also provides in the new s46GF for the Minister to issue Directions to the planning authorities in relation to the preparation and content of infrastructure contributions plans. The section goes on to set out (without limitation) numerous matters that such Directions could address, including, specifically:

• the type of land to which ICPs may apply;
• the classes of development of land for which the levies may or may not be imposed;
• the types of ICP preparation costs that may be included;
• the method for determining the amount of the standard levy payable for a development of land, including any maximum amount allowable; and
• the method for annual indexation to be applied to the costs of the works.

Directions must be published in the Government Gazette, and planning authorities must comply with any such Directions.

The Bill goes on to set out requirements applying to collection agencies and municipal councils in relation to the mechanisms for requiring payments, refunding payments and accepting security or works or land in lieu of required payments. Notably, works, facilities or land provided before an application for a permit was made or development is carried out can be accepted in lieu of the payment.

What else is required for implementation?

As noted above, the Bill has left much of the detail of the levies to be directed through the use of Ministerial Directions that are yet to be drafted or published.

The former Government had previously set out on the Department website a list of what further tools and documents would be developed to support implementation of the new system, including the following:

• a Ministerial Direction to set out the form and content of infrastructure contribution plans;
• new Infrastructure Contribution Plan Guidelines;
• development of the Infrastructure Contribution Overlay, Schedule and Practice Note;
• guidelines on the use of s173 agreements to facilitate off-site infrastructure;
• guidelines on the use of works in kind agreements; and
• terms of reference for a new Infrastructure Standing Advisory Committee.

These tools and documents are still likely to be required in order to implement the new legislation effectively, although it is unclear from the Ministerial announcement or the Department website whether all of these tools are still proposed. In particular, it is not clear whether a Standing Advisory Committee is still proposed.

The previous Government had also published³ the rates and allowable items for the standard levy and the supplementary levy, according to whether the land is in a Growth Area or a Strategic Development Area, as set out in the table below:

It is unclear whether the same allowances or rates will apply to the system under the current Government. However, it is likely to be broadly the same, given the above items were largely based on the Advisory Committee recommendations and the Government has stated that the Advisory Committee work has formed the basis of the new system.