Change to development contributions legislation welcomed

Commercial and industrial property developers have long felt hard done by with development contribution legislation – often bemoaning the imposition of a “development tax” on already capital-intensive undertakings, and the limited objection process. 

The Local Government Amendment Act 2014, which came into effect on August 8, paves the way for a fairer and more transparent development contributions framework for those operating in the commercial and industrial property sector, Bayleys national director commercial John Church says.

“From discussions I have had with developers around the country, there is a feeling that the new legislation provides more clarity and better direction for growth-related infrastructure,” says Mr Church.

“There did seem to be an element of ‘hit and miss’ under the old legislation whereby developers and councils were often on different pages when it came to development contributions.”

The amendment act includes a new purpose statement for development contributions, which talks of recouping a fair, equitable proportion of the costs of capital expenditure necessary to service growth.

“There are also structures for clear links to be established between the building development and the development’s demands for infrastructure. These are designed to make things clearer for all parties, which has to be good for commercial development,” Mr Church says.

“Change and growth are inevitable in the commercial and industrial property sector. Given the demand and performance of the sector, anything that streamlines the development process for those looking to add to the commercial landscape has to be a positive.”

Property Council chief executive Connal Townsend says the passing into law of the Local Government Amendment Act 2014 is a massive leap forward. Mr Townsend says he has received passionate and vital input on this issue over a number of years from members across the country.

“No doubt there will still be challenges as legislation can often be limiting,” Mr Townsend says. 

“It will still come down to councils to ensure they comply with the new rules, in particular the provisions which set out the basis for imposing any charges. 

Cost allocations used to establish development contributions are to be determined according to who benefits – including the community – as well as who created the need for assets. The legislation says it should be made clear just what development contributions are being used for and why.

The amended legislation addresses the reconsideration and objections process to provide a timely and cost-effective way to challenge development contributions.

The new legislation also accommodates “out of the box” thinking with provision to address unusual, complicated or lengthy development projects.

There are a number of other amendments affecting development contributions. The range of infrastructure that can be financed is narrowed, the ability to levy charges for reserves for non-residential development is removed, and the definition of community infrastructure has been significantly narrowed – which will likely limit a council’s ability to charge development contributions for some community facilities.

“This will provide greater transparency for the use of development contributions and how infrastructure projects are to be financed,” Mr Church says.

Development contributions are now to be considered on a case-by-case basis, and are based on a combination of industry standards and information provided by the developer applicant. The calculation depends on floor size, type of business undertaken and the location of the development. A development contribution will be payable if a commercial or industrial development project increases the demand on stormwater, wastewater, water or road assets, or increases the demand for community facilities.

Important changes under the new legislation include: 

• introducing a new purpose and principles provisions setting out the basis for development contribution charges; 
• clarifying and narrowing the range of infrastructure that can be financed by development contributions;
• improving the transparency of territorial authorities policies, including requiring reporting on projects being funded by development contributions ;
• encouraging greater private provision of infrastructure through the use of development agreements; 
• restrictions on requiring development contributions for reserves; and 
• introducing an objections process, where decisions are made by independent decision makers 

Freelance writer Jody Robb is funded by Bayleys Real Estate