NSW broadening state infrastructure contribution regime

After years of uncertainty regarding the future of State Infrastructure Contribution (SIC) levies, the NSW Government has now passed legislation which will overhaul how development contributions will be calculated in relation to State infrastructure. 

Under the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Act 2023 (Act), the current SIC framework will be replaced with a new broad-based charge called a ‘Housing and Productivity Contribution’ (HPC).  The contribution rates under the HPC will be set by way of a Ministerial planning order and will vary depending upon land use and the region. 

While the Ministerial order has not yet been published, we understand that contribution rates will be in the range of $6,000-$12,000 for residential dwellings and $15-$30 per square metre of new gross floor area for industrial, commercial and retail development.    

Key changes to State developer contributions

The Housing and Productivity Contribution (HPC) will be imposed from a Ministerial planning order which will include:

• the amount of contribution required;
• the classes of development and regions to which the contribution applies;
• the time at which the HPC is to be paid; and
• the form of the HPC and whether it includes a component for the provision of specified transport infrastructure or a contribution towards biodiversity certified land.

Although the Ministerial planning order has not yet been released, the Department of Planning and Environment has published a guidance document which outlines how the HCP will apply.  The key changes are discussed below. 

Broader application of the contributions framework

The HPC will apply to localities within Greater Sydney, Illawarra-Shoalhaven, Lower Hunter, and Central Coast.

It is intended that the HPC will apply to a broad range of development including:

• residential development that intensifies land-use where new dwellings are created;
• commercial and retail development and commercial office buildings where new floorspace is created; and
• industrial development such as warehouses and industrial buildings, where new floorspace is created.

Certain development, such as affordable housing, will likely be exempt from paying the HPC.

New contributions rates

The following new rates are anticipated to apply under the HPC.

Greater Sydney Region

Illawarra, Shoalhaven, Central Coast, and Lower Hunter

How regional infrastructure funded by HPCs may be provided

A HPC must not be imposed on development on land in a region to provide regional infrastructure outside the region or the State, except to the extent that it is for measures to conserve or enhance the natural environment.

No connection is required between the development on which a housing and productivity contribution is imposed and the regional infrastructure provided from the contribution, except:

• a transport project component of the contribution may be imposed on development on land only for transport infrastructure that benefits the area in which the land is located;
• a strategic biodiversity component of the contribution may be imposed on development on land only for measures to conserve or enhance the natural environment that were required for biodiversity certification of the land.

The new regime does not prohibit a developer from entering into a Works in Kind Agreement in lieu of paying the HPC.

Transitional arrangements

The HPC is anticipated to be introduced from 1 October 2023 and will apply to development applications made on or after 1 October 2023. The HPC regime will be phased in at discounted rates of 50 per cent for the first year, 25 per cent for the second year and have full effect from the third year onwards.

Previous determinations, directions and conditions of consent imposed under the former s7.23 and s7.24 of the EP&A Act will continue to apply (under the former SIC provisions/ministerial planning orders), however, the Act permits a previous determination or direction to be repealed (in full or in part) by a ministerial planning order or by a provision in the associated Regulations.

It is expected that the following SICs will be transitioned to the HPC regime on 1 October 2023:

• Bayside West
• St Leonards and Crows Nest
• Gosford City Centre
• Wyong Employment Zone
• Warnervale Town Centre
• Illawarra – Shoalhaven
• Frenches Forest.

The Western Sydney Growth Area SIC and the Western Sydney Aerotropolis SIC is not expected to be transitioned until 1 July 2026.