Development Victoria

Infrastructure Recovery Charge

The Revitalising Central Dandenong (RCD) 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 Infrastructure Recovery Charge (IRC) came into operation on 1 September 2006 and will remain in place until 31 December 2026, or the date upon which the Government’s investment in the RCD project has been recouped.

Overview

The RCD initiative is leveraging great private sector growth and is enhancing Dandenong as a place to live, work and visit. This injection of funds into Dandenong could not be made possible without the recovery of a portion of the investment through the IRC, resulting in community benefits including improved amenity and infrastructure.

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 determine calculation of the IRC (if applicable), or it will authorise the issuing of a building permit. 

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 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. Should this happen on multiple occasions, Development Victoria may report the matter to the Victorian Building Authority, advising that the surveyor in question is operating in contravention of the Building Act. 

Development Victoria must give notice of payment (or exemption) 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 an IRC be deferred, a 51Y agreement (effectively a ‘contract of liability’) may be entered into between Development Victoria and the party responsible for payment of the IRC. By entering into this agreement, this allows the project to proceed and Development Victoria will approve the issuing of the building permit.

Calculating the Charge

If applicable, the IRC is based on a percentage of the ‘development value’, whether this be for stand-alone building works, stand-alone subdivision works, or combined building and subdivision works. How the ‘development value’ is calculated depends on the nature of the development, but is based on 5% of the building works, or the estimated site value of the land to be subdivided, or a combination of building works and the estimated site value. 

Subdivision

In the instance of stand-alone subdivision (i.e. not combined with development, but subdividing into greater than two-lots), development value is the sum of the estimated site value of the land to be subdivided, and determined at the time of the subdivision.

Building work 

With respect to stand-alone building work (i.e. not combined with sub-division), development value is the sum of the site value at the time of development, and the cost of the building work.

Worked example

Within the Development Victoria Revitalising Central Dandenong declared project area, the IRC is 5% of the development value. 

In the case of stand-alone building works where the site value of the land is $250,000 and the construction cost is $400,000 (giving a development value of $650,000), the IRC in this instance would be $32,500 as the IRC is payable on the TOTAL development value and not just the portion in-excess of $325,910 (where $325,910 is the threshold amount for the 2017/2018 financial year). 

If a portion of the development value is considered to consist of fitout works, there may be an opportunity to apply for a waiver of some 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 construction 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, with the threshold amount is indexed each year.

The threshold amount is also structured to allow land owners and tenants the undertaking of works 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