Insights

In brief - Land developers should consider impact of latest amendment on development feasibility 

Section 94 contributions are never far from controversy and the recent “uncapping” of section 94 contributions is one such example.
 
Decisions from the Land and Environment Court over the years have pegged back overzealous approaches to contributions. Various statutory reforms since the initial scheme in the Environmental Planning & Assessment Act 1979 (NSW) (EP&A Act) have also sought to control and regulate section 94 contributions due to different pressures on the planning system at different times. The Minister has also at times intervened with other mechanisms that impact the imposition of section 94 contributions.
 
Highlighting the close nexus between town planning and the Government’s economic portfolios, the first attempt to impose a kind of cap on contributions was introduced in 2008 by the then Premier Nathan Rees in response to the impact of development contributions on housing supply and affordability. That led to the introduction of a $20,000 conditional cap, i.e. it could be exceeded where approved by the Minister.
 
In late July 2017, however, there was another change to section 94 contributions,  introduced by the Minister for Planning with many industry figures referring to the changes as an “uncapping”.
 
The application of the amendment is somewhat complex and applies differently, depending on the type and location of the proposed development.
 
This article explains the upshot of the amendment in simple terms, including when the effects of the changes will be felt.

Summary of the changes to section 94 contributions 

Two processes in train for "uncapping" section 94 contributions

  1. In Local Infrastructure Growth Scheme (LIGS) areas, the maximum cap will be incrementally increased from 1 January 2018 until 1 July 2020 when the caps will be removed entirely
  2. Land identified within schedule 2 of the 2012 Direction will remain subject to a $30,000 cap for each dwelling or residential lot authorised to be created by a development consent. However, where an IPART reviewed contributions plan applies to the land, the cap will not apply

Requirement to pay section 94 contributions under development consents

Section 94 of the EP&A Act gives consent authorities the power to require contributions as part of a development consent. The contributions can be in the form of monetary contributions, the dedication of land free of cost or a combination of both. The power to require contributions is triggered if the consent authority is satisfied that the development will or is likely to require the provision of or increase the demand for public amenities and public services within the area.
 
Section 94(2) of the EP&A Act works to ensure that consent authorities only require a reasonable dedication or contribution for the provision, extension or augmentation of the public amenities and public services concerned. In addition, section 94B of the EP&A Act only allows contributions to be imposed if the contribution is of a kind and is determined in accordance with an applicable contributions plan. Section 94 contributions plans are prepared for precincts and stipulate the contribution rate that is to be used to calculate the contributions payable for developments within the precinct.

Other types of contributions payable under the EP&A Act

  • A fixed percentage levy on the proposed cost of carrying out the development (these cannot be imposed where a section 94 contribution is operating)
  • A special infrastructure contribution for special contributions areas
  • Affordable Housing contributions as required by a State Environmental Planning Policy
Developers should be aware of all the contributions that are payable as a condition of development consent as the amounts may impact the feasibility of the project.

Recent changes to the Environmental Planning and Assessment (Local Infrastructure Contributions) Direction 2012

Up until 28 July 2017, the 2012 Direction provided that for certain land, the maximum amount of monetary contributions payable under section 94 of the EP&A Act was either $20,000 or $30,000 (depending on the location of the land) for each dwelling or residential lot authorised to be created by a development consent. The 2012 Direction applies to all councils, Sydney Planning Panels and Joint Regional Planning Panels.
 
On 28 July 2017, the NSW Department of Planning and Environment released the Environmental Planning and Assessment (Local Infrastructure Contributions) Amendment Direction 2017 which amended the 2012 Direction. The amendment allows councils to increase and "uncap" the amount of section 94 contributions that can be imposed on certain developments.
 
However, the amendment operates differently depending on the location and type of development proposed. The two processes in train result either in the incremental increase of the cap or the instant "uncapping" of section 94 contributions where an IPART reviewed contributions plan applies.

Incremental increases of section 94 contributions

Newly inserted clauses 6A, 6B and 6C of the 2012 Direction allow the incremental increase of section 94 contributions payable under specific contributions plans established for:
 
  • The Hills Shire
  • Blacktown
  • Wollongong
  • Rockdale
  • Liverpool
  • Camden

Blacktown City Council as an example of incremental increases of section 94 contributions

Clause 6A of the 2012 Direction sets out the maximum section 94 contributions that Blacktown City Council can require under the Section 94 Contributions Plan No. 20 - Riverstone & Alex Avenue Precincts. The maximum rate the Council may impose is as follows:
Relevant period Maximum amount of contribution
Date on which 2017 Direction takes effect to 31 December 2017                                                                                                                                  $30,000 for each dwelling or residential lot
1 January 2018 to 30 June 2018 $35,000 for each dwelling or residential lot
1 July 2018 to 30 June 2019 $40,000 for each dwelling or residential lot
1 July 2019 to 30 June 2020 $45,000 for each dwelling or residential lot
On and from 1 July 2020 An amount determined in accordance with the applicable contributions plan, if the contributions plan is a specified contributions plan as in force at the date on which the 2017 amendment direction takes effect or an IPART reviewed contributions plan

On 1 July 2020, the caps will be removed entirely, but the amounts payable will remain subject to provisions within an IPART reviewed contributions plan. IPART reviewed contributions plans may contain higher rates than what is currently provided for within section 94 contributions plans. 

It is also important to note that the application of the cap will be determined at the date the development consent is granted by a council or a planning panel.

Instant "uncapping" for IPART reviewed contributions plans

Schedule 2 of the 2012 Direction identifies land that is subject to a $30,000 maximum contribution cap for each dwelling or residential lot authorised to be created by a development consent. However, as a consequence of the amendment, the $30,000 cap does not apply to the imposition of a condition of development consent in accordance with an IPART reviewed contributions plan. As such, the $30,000 cap will cease to apply where an IPART reviewed contributions plan that is approved by the Minister and adopted by the council, sets a higher rate for areas identified in schedule 2.

It remains to be seen whether IPART and the Minister will agree to exceedances and whether they are able to be justified.

Already "uncapped"

Schedule 1 of the 2012 Direction identifies land that is exempt from contribution caps. The amendment does not affect the land identified within schedule 1.

Key cases significant to forming planning strategies in light of recent changes

1. Rose Consulting Group v Baulkham Hills Shire Council [2003] NSWCA 266This case involved the consideration of the standard of reasonableness required for section 94 contributions. In this case, a developer of pre-planned land was subjected to a change in a section 94 contributions plan which substantially increased the contributions for land that was already 50% developed and contributions had been paid for.

The Court found that it had a broader discretion than that of the Council in amending an unreasonable condition of development consent so that it was no longer unreasonable. The test for the reasonableness of the condition was also only required to be tested according to its ordinary connotation, rather than to a Wednesbury standard (ie that the decision is so unreasonable that no reasonable authority could ever come to it.)

As a result, if section 94 contributions are imposed that are unreasonable, the Court has the power to disallow or amend the condition because it is unreasonable, even if it was calculated in accordance with a contributions plan. 

2. Broker Pty Limited v Shoalhaven City Council [2008] NSWCA 311
This case involved the question of whether the Council could impose additional contributions on owners of lots where a developer had previously obtained approval to subdivide the land and paid contributions, and the owners were now seeking approval to construct dwellings at a time when the Council had adopted a new contributions plan.

The Court found that the Council was not prevented from requiring additional contributions as part of the approval to construct dwellings. The granting of the subdivision consents did not impliedly grant consent to the lots being put to a residential use. Council was required to undertake an additional assessment with respect to the new application and reassess the contributions.

Therefore, applicants may be required to pay two or more sets of contributions for projects that involve sequential development consents. Further, where contributions plans are updated, the amount of contributions can be assessed using the updated contributions plans that may require higher contributions than contemplated under the first development consent.

Implications of "uncapping" section 94 contributions

If you are contemplating developing land that is caught by the changes to the maximum contributions caps, be aware that the changes could impact on development feasibility if not carefully managed. 

Given this, the changes may lead to a run on development applications in these areas, in an attempt to beat the introduction of the changes. 

Even still, lodging a development application before the changes commence does not immunise a development proposal from uncertainty as the application may not be determined promptly forcing the matter to court for determination, which also involves its own set of timeframes. 

Depending on the location of the proposed development, the higher caps will apply from 1 January 2018 or once an IPART reviewed contributions plan takes effect.

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​