Proposed new framework for infrastructure contributions in NSW

6 May 2013

The Planning Bill 2013 – Exposure Draft (Bill) and A New Planning System for NSW – White Paper (White Paper) propose a new system governing the provision of infrastructure contributions.

There will be three types of infrastructure contributions:

  • Local Infrastructure Contributions (LICs);
  • Biodiversity Offset Contributions (BOCs); and
  • Regional Infrastructure Contributions (RICs).

The requirements for the provision of each of these forms of development contribution will be contained within Local Infrastructure Plans (LIPs).

Separate Growth Infrastructure Plans (GIPs), which are prepared by the Director-General, may be made by the Minister to identify additional regional infrastructure for which a contribution may be imposed. A GIP may also identify priority infrastructure for a region and other infrastructure for the sub-region.

LIPs will be informed by the objectives contained in Subregional Delivery Plans (made by the State government) and Local Plans (made by local councils). In accordance with the hierarchical approach underpinning the proposed planning reforms, these plans will be informed by the objectives contained in Regional Delivery Plans and NSW Planning Policies, which sit at the top of the strategic planning hierarchy.

The new Infrastructure Contribution System

1. Forms of Contribution

1.1             Local Infrastructure Contributions (LICs)

LICs will be used to fund infrastructure contained in LIPs. These contributions will be uncapped but based on a standardised, benchmarked cost for local infrastructure. Despite the standardisation of infrastructure costs, contribution amounts may vary between councils, to reflect any cost differences particular to that local government area.

Across NSW, local infrastructure will be divided into four categories:

  • Local roads and traffic management;
  • Local open space and embellishment;
  • Basic community facilities (land and capital); and
  • Capital costs of drainage.

The list of “essential local infrastructure” outlined above will be refined by a Contributions Taskforce.

Additionally, different charging mechanisms will apply to infill and greenfield councils. In greenfield areas, contributions will be based on the recovery of the full cost of delivering infrastructure that is essential to support new development. For infill, the contribution recovered will reflect the cost of infrastructure in close proximity to the new development. For both greenfield and infill development types, the contribution will be based on a unit charge, both of which will be finalised in the coming months.

1.2             Regional Infrastructure Contributions (RICs)

Developers of residential, commercial and industrial development will be asked to contribute to State infrastructure under RICs. These contributions will be “used to recover part of the costs of regional and state roads, other transport infrastructure like depots and interchanges, schools and upgrades to regional open space.”

In accordance with Subregional Delivery Plans, the contributions will be calculated and charged on a subregional basis. The Sydney subregions will be identified from the final version of the draft Metropolitan Strategy for Sydney to 2031. For other high growth regions, the methodology for charging and calculating contributions is yet to be determined.

The contribution rate for RICs will be informed by priorities identified in Subregional Delivery Plans and costs identified in associated Growth Infrastructure Plans, both of which will be prepared by the State. When setting regional contributions, the Government’s approach will involve significant subsidies of full infrastructure costs, “recognising the direct and indirect economic benefits generated from new development” and “the Government’s agenda for significantly increasing housing supply”.

1.3             Regional Growth Funds

Instead of requiring contribution for the acquisition of regional open space and stormwater drainage (previously made via section 94), these types of contributions will be removed from local contributions plans and funded through a new Regional Growth Fund. Under the new system, “all forms of new development within a region will be required to make a modest contribution to the fund”.

These contributions will be calculated and charged on a regional basis, meaning that the cost of acquiring land for regional open space and drainage will be shared by all development in a region.

2. Operation of contribution requirements

2.1             General

The making of contributions in NSW will occur almost exclusively under this new system. The use of alternative arrangements under Voluntary Planning Agreements (VPAs) will be “significantly curtailed and only available in exceptional circumstances”. VPAs are discussed in more detail in section 6 of this In Brief.

The circumstances in which contributions will be required under the new system do not deviate significantly from those set out in the Environmental Planning and Assessment Act 1979 (EPA Act), with contributions applicable to residential, commercial or industrial development (including complying development) in both greenfield and infill situations.

It is not envisaged that contributions will apply to smaller scale development such as alternations and additions.

Part 7 of the Bill contains the provisions applicable to development contributions. A contribution:

  • may be imposed by way of a condition of development consent;
  • may be in respect of the:
    • extension or augmentation of local infrastructure;
    • recoupment of the cost of providing, extending or augmenting local infrastructure; and
    • exercise of any function of a council or public authority in connection with the administration of infrastructure contributions and; and
  • must be in accordance with the applicable contribution provisions, which will be found in Part 4 of the relevant local plan. However, where the Minister is the consent authority, the Minister may impose a contribution which is not in accordance with the local plan.

The Bill provides that a local infrastructure contribution cannot be imposed unless there is a local infrastructure plan. However, it is unclear whether savings and transitional provisions will preserve the effect of existing section 94 contributions plans for this purpose.

The current distinction between contributions required under sections 94 and 94A of the EPA Act is preserved in the new system so that infrastructure contributions may be made by way of “direct” or “indirect” contributions.

2.2             Direct contributions

A direct contribution, that is a contribution requiring the payment of money towards the provision of infrastructure (equivalent to contributions under section 94 of the EPA Act), may only be made in respect of a local infrastructure contribution.

Such a condition may only be imposed if the consent authority is satisfied that the development will or is likely to require the provision of or increase the demand for local infrastructure. Where a direct contribution is for the recoupment of the cost of providing existing infrastructure:

  1. the development must benefit from the existing infrastructure; and
  2. the existing infrastructure must have been provided in order to facilitate the carrying out of development in the area.

2.3             Indirect contributions

An indirect contribution, that is a contribution requiring the payment of a percentage of the capital investment value (CIV) of the proposed development (equivalent to contributions under section 94A of the EPA Act), may be made in respect of local or regional infrastructure contributions. Regional infrastructure contributions may only be made by way of this type of contribution.

The CIV of a development is calculated by reference to the area of the proposed development, or by an alternative method which will be prescribed by the regulations, which are as yet undrafted.

Indirect contributions do not require any connection between the development the subject of the contribution and the object of the expenditure of the money.

2.4             Area to which contributions may be applied

Direct or indirect contributions may be imposed for the benefit of:

  • the local government area in which the development occurs;
  • another local government area, if the development adjoins another local government area; or
  • an area outside of New South Wales, if the development adjoins another State or Territory.

3. Other contributions

3.1             Conditions for offsite works

Under the new system, Councils will only be able to condition a development consent to require off site works when the works reasonably relate to the development. Associated benchmarks will be developed to ensure that only appropriate works are included in development consent conditions.

3.2             Biodiversity Contributions

Contributions for biodiversity offsets will be made separately from those required for infrastructure. The requirement for these contributions will be factored into Subregional Delivery Plans and given effect through local plans.

3.3             Affordable Housing Contributions

Affordable housing contributions will not form part of the new contributions system and will fall under the umbrella of strategic planning within the new regime. Affordable housing contributions may not be imposed as a condition of a development consent. Grandfathering arrangements will apply to existing affordable housing contributions.

4. Timing and methods of payment

Local plans will set out the timing for payment of both local and regional infrastructure contributions.

The new system aims to offer greater flexibility in the methods by which contributions can be made, including:

  • upfront infrastructure contribution payment made at the point of subdivision;
  • deferred payments made nearer the point of sale;
  • works-in-kind contributions (where infrastructure is constructed directly by a developer); and
  • in-kind dedication of land.

For in-kind works, developers may offer an alternative infrastructure solution if that solution better meets the needs of growth development and is consistent with the contribution principles and applicable infrastructure plans. 

5. Governance

Councils’ contribution collection and expenditure will be independently audited. If a council is found to have under-performed in respect of certain contributions, it may be required by the Minister to rectify this within three months. If it does not do so, the Minister can, with the assistance of the relevant Subregional Planning Board, require that those funds be applied to relevant subregional infrastructure priorities and be spent within a set period.

In any event, a council is required to apply monetary contributions to the provision of infrastructure for which they were provided within a period of three years. The Minister may extend this period of time by a further three years if requested.

6. Planning Agreements (VPAs)

Although VPAs will continue to exist under the new regime, they will be subject to a number of restrictions and conditions of use.

A VPA is defined in the Bill as:

“... a voluntary agreement between one or more public authorities and a person (the developer) under which the developer is required to dedicate land free of cost, pay money, or to carry out public or other works, or any combination of them, to be used for or applied towards the following:

  1. the provision of infrastructure that is identified in a local infrastructure plan or growth infrastructure plan,
  2. the provision of infrastructure that is identified in a Ministerial planning order where there is no local infrastructure plan applying to the land concerned or where there is no growth infrastructure plan applying to the land concerned,
  3. the provision of affordable housing that is identified in a strategic plan,
  4. the conservation or enhancement of the natural environment of the State.”

The provisions of the Bill do not make any mention of “material public benefit” or “public purpose”, which are current requirements for VPAs under section 93F of the EPA Act. This indicates that the range of options for the terms of VPAs will be strictly limited to those set out above, and provides the basis for the White Paper statement that VPAs will “generally be only be used for state significant development and under exceptional circumstances such as through density bonus schemes.”

The requirements relating to the contents of VPAs, currently prescribed by section 93F(3) of the EPA Act, will remain the same.

No connection is required between the development to which a VPA relates and the object of expenditure of any money paid under the VPA.

The following measures will also apply in respect of VPAs:

  • VPAs must be consistent with the contribution principles currently set out in section 7.3 of the Bill;
  • Infrastructure covered by a VPA must be based on the proposed cost arrangements for infill and greenfield developments in the standard contributions system;
  • VPAs and the process for their negotiation will be standardised;
  • VPAs can only be entered into in areas that have an existing Local Infrastructure Plan or Growth Infrastructure Plan, or where State wide or regional infrastructure benchmarks prepared by the Department of Planning and Infrastructure apply; and
  • Affordable housing contributions will be strictly limited to where they are authorised by and consistent with a Regional Growth Plan or Subregional Delivery Plan.

7. Appeals

The Bill proposes that conditions requiring direct contributions will be appealable to the Land and Environment Court (Court), which will have the power to amend those conditions. However, conditions requiring either indirect contributions or biodiversity offset contributions, which are imposed in accordance with a local plan, cannot be disallowed or amended by the Court.

Also, a condition requiring a regional infrastructure contribution, imposed in accordance with the provisions of a local plan, may not be disallowed or amended by the Court.

8. Timeline

The NSW Government is seeking to have the new contributions arrangements finalised by June 2013. This will include transitional provisions for VPAs and further refinement of arrangements for contribution payment methods.

After the new system has been settled, all infrastructure plans governing contribution requirements will be subject to review every four years.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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Christine Covington

Partner. Sydney
+61 2 9210 6428


Louise Camenzuli

Partner. Sydney
+61 2 9210 6621


Daniel Webster

Associate. Sydney
+61 2 9210 6145