Victorian GAIC regime – recent significant changes

7 minute read  12.07.2023 John Riley, Aaron Chisholm

An overview of the recent changes to the GAIC regime made by the Victorian Government alongside other revenue raising announcements in the Victorian Budget.

The Victorian Government has made some significant changes to the imposition of the Growth Areas Infrastructure Contribution (GAIC) charge. These changes may impact both existing and proposed broadacre subdivision projects over land that is within areas that are subject to the GAIC regime.

The GAIC regime is contained in the Planning and Environment Act 1987 (Vic) (Act). Broadly, GAIC is a one-off charge (calculated on a per hectare basis) that applies to certain urban zoned land in Melbourne’s expanding fringe suburbs.

GAIC is generally payable on the first 'GAIC event' that occurs in relation to the land. Broadly, a GAIC event includes a transfer or subdivision of the land or an issue of a building permit relating to the land. GAIC affected land has a GAIC recording placed on the relevant title. The GAIC recording is only removed once the related GAIC liability has been paid.

Summary of changes to the Victorian GAIC regime

The recently passed legislation that contained the 2023 Victorian State Budget measures made a number of significant changes to the GAIC regime. In summary these key changes (which took effect on 28 June 2023):

  • broaden the definition of 'GAIC event' to include the certification of plans of subdivision created under section 35 of the Subdivision Act 1988 (Vic) (Subdivision Act) (Non-SOC Plans of Subdivision) – these plans did not previously constitute a GAIC event and therefore did not give rise to a GAIC liability; and
  • introduce a number of new GAIC exemptions, broadly these are exemptions for:
  1. certain Non-SOC Plans of Subdivision (to make their treatment consistent with ordinary subdivisions);
  2. a vesting of land under the Land Acquisition and Compensation Act 1986 (Vic);
  3. acquisitions of certain 'economic entitlements' (as defined in the Victorian stamp duties legislation) in relation to land; and
  4. transfers of land to the Crown, municipal councils or a water authority.

We discuss these changes in more detail and comment on their potential practical implications below.

Non-SOC Plans of Subdivision now potentially a 'GAIC event'

Under the Subdivision Act, there are a number of processes by which land may be subdivided. Ordinarily, where a plan of subdivision is prepared in relation to a parcel of land, before that plan can be registered a statement of compliance must be issued by the local municipal council confirming that the subdivision meets all relevant planning requirements. However, where an 'acquiring authority' (which includes councils and the State) is to acquire land after its subdivision, a simplified subdivision process exists under section 35 of the Subdivision Act. Relevantly, plans of subdivision prepared under section 35 of the Subdivision Act do not require the issue of a statement of compliance. These are the 'Non-SOC Plans of Subdivision' referred to above.

Up until the introduction of the recent amendments, the certification and registration of a Non-SOC Plan of Subdivision did not constitute a 'GAIC event' and therefore did not give rise to a GAIC liability. This is because a subdivision would only give rise to a GAIC liability where a statement of compliance was issued for the subdivision.

To combat this apparent gap in the GAIC provisions of the Act, a new section has been inserted into the Act that expressly provides that the certification of a Non-SOC Plan of Subdivision will constitute a GAIC event. This has a number of implications for landowners or developers who are developing GAIC land.

Firstly, the changes can increase the total amount of GAIC payable by a landowner or developer for a particular project. Previously, land of less than 5 hectares being acquired by a local council or other acquiring authority could be subdivided and transferred without triggering GAIC. For example, a local council could subdivide and acquire a road reserve or lot for a local park (of less than 5 hectares) under a Non-SOC Plan of Subdivision and this would not give rise to a GAIC liability. However, now it is no longer possible to excise such public purpose land by way of a Non-SOC Plan of Subdivision to reduce the overall GAIC liability of the project. Absent any favourable reimbursement arrangement with council, landowners and developers will be required to pay GAIC on land which it will not own or directly profit from (e.g. roads and public open space land).

Additionally, it is important to note that certification of a Non-SOC Plan of Subdivision will trigger GAIC on the whole title affected by that plan (unless an exemption applies) and that GAIC liability cannot be managed through a staged payment arrangement (SPA). That is, Non-SOC Plans of Subdivision cannot be the subject of a SPA, which otherwise allows landowners and developers to align the payment of the GAIC with the release of each subdivision stage (rather than paying all the GAIC upfront on the first subdivision of the project).

This means there is the potential for the GAIC to be triggered in respect of the entire project land upon the certification of the Non-SOC Plan of Subdivision.

Developers and landowners will now need to manage this risk either by negotiating with council to delay the occurrence of a Non-SOC Plan of Subdivision or otherwise ensuring the relevant subdivision falls within the public purpose subdivision concession in the GAIC regime (explained further below).

Broadly, for the public purpose concession to apply, the sole purpose of the relevant subdivision must be to provide 'public purpose land'. If this is satisfied, the resulting concession is that GAIC is only imposed on the area of the public purpose land (and not on the balance of the land within the relevant title(s).

For example, where a Non-SOC Plan of Subdivision is certified and the sole purpose of that plan is to create a public road, only the area of the road reserve will be subject to GAIC at that point in time. The balance land may still be subject to GAIC in the future (e.g. when it is later subdivided for residential development).

Before proceeding with a Non-SOC Plan of Subdivision, taxpayers should ensure this public purpose concession will apply (i.e. that the subdivision is for the sole purpose of providing for public purpose land), noting that 'sole purpose' requirements in a revenue statutory context have been traditionally difficult to satisfy with certainty.

Additional GAIC exemptions

A number of new GAIC exemptions have been introduced under the new legislation. Where any of these exemptions apply, a GAIC liability will not be imposed (even if the relevant subdivision or transaction is otherwise a 'GAIC event'). These exemptions include:

  • The certification of a Non-SOC Plan of Subdivision that is an 'excluded subdivision of land' (e.g. subdivisions to create a school site, realign a common boundary or separating GAIC land from non-GAIC land), in line with the existing exemptions for plans of subdivision requiring a statement of compliance.
  • A vesting of land that has been compulsorily acquired by a government authority (e.g. the State or a council).
  • The acquisition of an economic entitlement (broadly, a right to participate in the income, rents, profits, capital growth or proceeds of sale, or to acquire such a right in relation to Victorian land) in respect of GAIC land that is subject to stamp duty under Victoria's stamp duties legislation.
  • Certain declarations of trust and transfers relating to an apparent purchaser of property (i.e. where a constructive trust is established on the acquisition of property by an apparent purchaser by reasons of the real purchaser providing some of the purchase monies).
  • Transfers of property to (or to be held on behalf of) the Crown in right of Victoria, a local municipal council or a water authority.
  • Transfers of property to the Victorian Rail Track corporation from certain government transport entities and representatives.

As has always been the case, careful consideration must be given to the potential GAIC consequences when dealing with GAIC land. Where the subdivision and compulsory acquisition of GAIC land is proposed to occur by way of a Non-SOC Plan of Subdivision, GAIC advice should be sought to ensure that a GAIC liability is not unnecessarily triggered or brought forward on all, or a significant portion, of the project land.


Please contact us if you would like to discuss the application of these new GAIC measures (or the GAIC regime more generally) to your business or circumstances.

Contact

Tags

eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuYW1laWQiOiI5NmQ1ZmM4OS03OWYxLTRhMTQtOGFmYi02NzIzNTU3ZmFmOTYiLCJyb2xlIjoiQXBpVXNlciIsIm5iZiI6MTczOTA4MDU3MiwiZXhwIjoxNzM5MDgxNzcyLCJpYXQiOjE3MzkwODA1NzIsImlzcyI6Imh0dHBzOi8vd3d3Lm1pbnRlcmVsbGlzb24uY29tL2FydGljbGVzL3ZpY3Rvcmlhbi1nYWljLXJlZ2ltZS1yZWNlbnQtc2lnbmlmaWNhbnQtY2hhbmdlcyIsImF1ZCI6Imh0dHBzOi8vd3d3Lm1pbnRlcmVsbGlzb24uY29tL2FydGljbGVzL3ZpY3Rvcmlhbi1nYWljLXJlZ2ltZS1yZWNlbnQtc2lnbmlmaWNhbnQtY2hhbmdlcyJ9.CDVSpU1_s4x6eaWZcbMKG5iPG3-WjVc1nPRfLHNQdho
https://www.minterellison.com/articles/victorian-gaic-regime-recent-significant-changes