Posted on July 9, 2020 by Lindsay Taylor and Sophia Urlich

Development Contributions: Temporary Deferral of Payment Arrangements & Requirement for Evidence of Payment Before Occupation Certificate

The State government yesterday introduced a suite of measures through Ministerial directions and determinations and amendments to regulations under the Environmental Planning and Assessment Act 1979 (EPA Act) relating to the payment of State and local infrastructure contributions and levies for certain types of development.

As a result of the changes, for certain types of development, the payment of local infrastructure contributions and levies throughout NSW, and monetary special infrastructure contributions (SICs) in the Western Sydney Growth Area and Gosford City Centre Special Contributions Areas, will be temporarily deferred to prior to the issue of an occupation certificate. Accredited certifiers will also be subject to an ongoing requirement to confirm that all relevant State and local infrastructure contributions or levies have been paid before issuing an occupation certificate for any part of an applicable development.

Temporary deferral of payment of contributions and levies during COVID-19 pandemic

In an attempt to stimulate the economy in response to the economic crisis caused by the COVID-19 pandemic, the Minister for Planning and Public Spaces has issued a number of Ministerial Directions and Determinations that temporarily defer the payment of infrastructure contributions and levies under s7.11, s7.12 and s7.24 of the EPA Act to prior to the issue of the first occupation certificate or interim occupation certificate (as applicable) for applicable development.

Ministerial Directions and Determinations

The Environmental Planning and Assessment (Local Infrastructure Contributions – Timing of Payments) Direction 2020 (Local Ministerial Direction) defers the payment of local infrastructure contributions and levies under s7.11 and s7.12 of the EPA Act for applicable development throughout NSW.

The Environmental Planning and Assessment (Special Infrastructure Contribution – Western Sydney Growth Areas) Amendment Determination 2020 and the Environmental Planning and Assessment (Special Infrastructure Contribution – Gosford City Centre) Amendment Determination 2020 (together, SIC Determinations) similarly defer the payment of SICs under s7.24 of the EPA Act for applicable development in the Western Sydney Growth Area and the Gosford City Centre Special Contributions Areas.

The Environmental Planning and Assessment (Special Infrastructure Contribution – Western Sydney Growth Areas) Direction 2020 and Environmental Planning and Assessment (Special Infrastructure Contribution – Gosford City Centre) Amendment Direction 2020 (together, SIC Directions) set out conditions of consent that must be imposed in accordance with the SIC Determinations.

The Local Ministerial Direction, SIC Determinations and SIC Directions all came into effect on 8 July 2020 when they were published in the New South Wales Government Gazette.

Applicable development 

The Local Ministerial Direction, SIC Determinations and SIC Directions apply to development consents that authorise the erection of a new building or a change of use of an existing building, and require an occupation certificate but exclude development with an estimated  cost of less than $10 million (at the time the development application is lodged) and development that involves the subdivision of land that will result in the creation of additional lots (whether or not it also involves the erection of a new building of a change of use to an existing building). The Local Ministerial Direction also does not apply to development the subject of an application for a complying development certificate.

The Local Ministerial Direction applies retrospectively in that it applies to relevant development consents granted before and after it came into effect.

The SIC Determinations and SIC Directions only apply to development consents granted on or after 8 July 2020.

Period of operation of Local Ministerial Direction, SIC Determinations and SIC Directions 

The Local Ministerial Direction operates until the end of the COVID-19 pandemic prescribed period within the meaning of s10.17 of the EPA Act, being 6 months from 25 March 2020 or a later day prescribed by the regulations which is not more than 12 months from 25 March 2020 (Pandemic Period).

The provisions of the SIC Determinations and SIC Directions apply to relevant development consents granted during the Pandemic Period.

Period of operation of payment deferral arrangements

The payment deferral arrangements under the Local Ministerial Direction and the SIC Determinations operate until 25 September 2022.

Under the Local Ministerial Direction and the Environmental Planning and Assessment (Special Infrastructure Contribution – Gosford City Centre) Amendment Determination 2020, the payment deferral arrangements will cease to apply if a construction certificate has not been issued for the development by 25 September 2022. After that date, local infrastructure contributions and levies, and SICs for applicable development in the Gosford City Centre Special Contribution Area, must be paid prior to the issue of the first construction certificate for the development.

Under the Environmental Planning and Assessment (Special Infrastructure Contribution – Western Sydney Growth Areas) Amendment Determination 2020, the whole or part of a SIC must be paid before the earlier stage for payment (such as before the issue of a construction certificate or strata certificate) that would otherwise apply, if that earlier stage occurs after 25 September 2022.

Effect of Local Ministerial Direction, SIC Determinations and SIC Directions 

The Local Ministerial Direction prevents a consent authority from imposing a condition on the grant of a relevant development consent that requires the payment of a local infrastructure contribution or levy (as applicable) to be made any time earlier than before the issue of an occupation certificate in respect of any building to which the development consent relates, unless the earlier stage for payment (such as before the issue of a construction certificate or strata certificate) occurs after 25 September 2022. The consent authority may require the payment of the whole of the monetary contribution required prior to the issue of the first occupation certificate for the development (see cl5(1)).

The Local Ministerial Direction does not prevent entry into any deferred payment arrangements set out in an applicable contributions plan (see cl5(4)), but will temporarily prevent a consent authority from requiring a developer to enter into a deferred payment arrangement, including the provision of a bank guarantee to secure payment, before the occupation certificate stage of a relevant development (see cl5(5)).

To assist Councils with the temporary changes to the timing of payment of local infrastructure contributions and levies, an example condition of consent is set out in a Note below cl5(2) of the Local Ministerial Direction. The Department of Planning, Industry and Environment (Department) has also drafted a sample condition of consent, which can be viewed here.

The SIC Determinations have the simple effect that SICs are not required to be paid until the occupation certificate stage of a relevant development. Mandatory conditions of consent that require SICs to be made in accordance with the SIC Determinations are set out in the SIC Directions.

New requirement for certifiers to obtain evidence of payment of contributions or levies prior to issuing occupation certificates 

On 3 July 2020, the Department issued Planning Circular PS 20-003 (Planning Circular) regarding the Environmental Planning and Assessment Amendment (Occupation Certificates) Regulation 2020 (OC Amendment Reg), which commenced on 8 July 2020.

The OC Amendment Reg amends the Environmental Planning and Assessment Regulation 2000 (EPA Reg) by inserting new cl149(2AA) and cl154F, which require an accredited certifier to obtain documentary evidence confirming that no State or local infrastructure contributions or levies are outstanding prior to issuing the first occupation certificate for applicable types of development, and for a copy of that document to accompany an application for an occupation certificate.

Applicable development 

The new requirements set out in the OC Amendment Reg apply to the issue of occupation certificates for new buildings or existing buildings subject to a change of use, where the estimated cost of the development (at the time the development application is lodged) is $10 million or more, and an occupation certificate is required (see cl149(2AA) and 154F(1); Planning Circular).

The new requirements do not apply to applications for occupation certificates made before the commencement of the OC Amendment Reg (see Part 17(1)), but will continue to operate beyond the Pandemic Period for applicable types of development.

Form of documentary evidence

The documentary evidence required is a letter or email from a Council or the Department (as applicable) that confirms that all necessary State and local infrastructure contributions or levies have been paid or are not required to be paid prior to the issue of an occupation certificate.

More specifically, the document will need to certify that an infrastructure contribution or levy under s7.11, s7.12 or s7.24 of the EPA Act:

  • is not required at any time before the issue of an occupation certificate, or
  • is required and the requirement has been met (see cl149(2AA)(a) and (b), cl154F(2)(a) and (3)(a)).

The certifier will also need to confirm that the document obtained from the Council or the Department is authentic, and that no further contributions or levies have been required since the document was issued (see cl154F(2)(b) and (3)(b)).

Effect of new requirements

Pursuant to the new requirements under the OC Amendment Reg, a certifier will be in breach of the EPA Act if they issue an occupation certificate, and an infrastructure contribution or levy that was required to be paid has not yet been paid.

The object of the new requirements is to increase certainty for consent authorities that there are no outstanding infrastructure contributions or levies prior to the issue of an occupation certificate, and to thereby limit or prevent revenue loss.

The new requirements will require Councils and the Department to implement new processes and procedures to support certifiers to obtain the required written confirmation that there are no outstanding State or local infrastructure contributions or levies prior to the issue of an occupation certificate. Councils will be able to cover the costs associated with those new processes and procedures through the levying of contributions in accordance with the costing schedule in their individual contributions plan.

The Local Ministerial Direction, SIC Determinations and SIC Directions can be viewed here. The OC Amendment Reg can be viewed here. The Planning Circular can be viewed here.

To discuss this blog please contact Dr Lindsay Taylor on 02 8235 9701 or Sophia Urlich on 02 8235 9708.