Development Victoria

Infrastructure Recovery Charge

The Revitalising Central Dandenong project has been made possible through a $290 million investment from the Victorian Government. This major urban development project, including the high level of government investment dedicated to it, would not be possible without the opportunity for the Victorian Government to recoup a portion of its investment.

The IRC came into operation on 1 September 2006 and remain in place for the period ending on the earlier of 31 December 2026 or the date upon which the Government’s investment in the RCD project has been recouped. 

Overview

The Revitalising Central Dandenong initiative is leveraging great private sector growth and is enhancing Dandenong’s reputation as a place to live, work and visit.

This massive injection of funds into Dandenong, which could not be possible without the recovery of a portion of the investment through the IRC, has resulted in community benefits from improved amenity and infrastructure, which in turn has resulted in improved property values for all landowners in the area.

Obligations

Development Victoria must be notified of all building permit applications prior to the issue of a building permit, in order for applicants to fulfil their obligations of Section 18A of the Building Act. This is required for all works requiring a building permit, regardless of the cost of works. 

Once Development Victoria has received the Section 18A notice, they are required to respond within 28 days, in accordance with Section 51W of the Development Victoria Act 2003. 

The response from Development Victoria will either request further information about the application to allow for a calculation of the charge, or it will authorise that a building permit can issue.

Should an IRC be triggered, a statement of charge will be prepared by Development Victoria and sent to the landowner, and/or the tenant of the Site.

Building Surveyors

In accordance with the obligations outlined in Section 18A of the Building Act, building surveyors are required to notify Development Victoria of ALL building permit applications within the declared project area. 

The City of Greater Dandenong updates Development Victoria of all building permits that are issued within the declared project area, to ensure that all building surveyors are fulfilling their obligations correctly. 

Any building surveyors who issue a building permit for a Site within the declared area without first notifying Development Victoria will be issued with a non-compliance warning letter outlining the breach and putting them on warning. Should this happen on multiple occasions, Development Victoria may report the matter to the Victorian Building Authority, outlining that the surveyor in question is operating in contravention of the Building Act. 

Development Victoria must give notice of payment of an IRC, or alternative agreement to the building surveyor. When this has been received by the building surveyor, they can proceed with the issue of the building permit.

51Y Agreements

Should the payment of a charge need to be deferred, a 51Y Agreement may be entered into between Development Victoria and the party responsible for the works, to allow the project to proceed and a building permit be issued prior to the payment being completed. 

Once a 51Y agreement is in place, Development Victoria will be able to allow the building permit to be issued. 

Calculating the Charge

The charge, where applicable, is based on a percentage of development value. How the development value is calculated depends on the nature of the development. The IRC is calculated at 5% of the development value. 

Development value refers to both the building and subdivision processes. 

Subdivision

In the instance of stand-alone subdivision, development value is the sum of both the amount that is the estimated site value of the land that is to be subdivided (as if the subdivision had already occurred at that date) and the estimated cost of building work.

Development 

With respect to stand-alone building work, development value is the sum of the site value at the time of development, and the amount that is the cost of the building work for the development.

Worked example

For example, in the case of stand-alone building works, the site value of the land may be $250,000 and the construction cost may be $400,000 (giving a development value of $650,000). Within the Development Victoria Revitalising Central Dandenong declared project area, where the charge is five per cent of development value, the IRC would be $32,500. (The IRC is payable on the TOTAL development value not just the portion in excess of $325,910.)

If a portion of the development value is considered to by fitout works, there may be an opportunity to apply for a waiver of the IRC 

Exemptions

Certain developments are exempt from the IRC. These exemptions are outlined in the Development Victoria Act, and a few are listed below: 

51A (2) The following classes of building work are exempt development under this Division – 

a) The construction of up to 2 dwellings on a lot

b) The construct of the following buildings when they are ancillary to a dwelling – 

i. A garage, carport or shed or similar non-habitable building;

ii. A fence, mast, antenna, retaining or free-standing wall, swimming pool, spa or similar structure;

c) The carrying out of protection work within the meaning of the Building Act 1993

d) Except as provided in subsection (4), any other building work if the total cost of building work does not exceed the threshold amount. 

51S ‘Infrastructure recovery charge not to apply to existing development’

51U ‘Infrastructure recovery charge not payable in respect of public land’

Please refer to the Development Victoria Act 2003 for further information, or speak with a staff member from Development Victoria if you are unsure. 

Threshold Amount 

The current threshold amount for the 2017/2018 financial year is $325,910. This amount has been calculated in accordance with Section 51B of the Development Victoria Act 2003. The threshold amount is indexed each year.

In simple terms, the threshold amount allows land owners and tenants to undertake works to their land or tenancy to the value of $325,910 over a three-year period without having to pay the IRC. 


Relevant documents:

 

FOR MORE INFORMATION

Development Victoria

Level 9, 8 Exhibition Street

Melbourne   VIC   3000

Ph.: 03 8317 3400