The SRO’s current approach to the interpretation and application of s 201RF(b) of the Planning and Environment Act 1987 (Vic) (P&EA) has been specifically rejected by the Supreme Court.

Section 201RF(b) is one of the few mechanisms in the legislation which allows a landowner to excise land area earmarked for State infrastructure use without triggering GAIC. The Commissioner has long sought to limit the practical application of the exemption in RF(b) by arguing that a subdivision implemented as part of a larger residential development is not undertaken ‘solely’ to provide land for State infrastructure purposes. The Supreme Court has labelled this reasoning as ‘fundamentally erroneous’ and a misconstruction of the section.

Why is 201RF(b) important?

Despite being imposed on a gross basis, GAIC was never intended to be charged on land used for State infrastructure purposes. Section 201RF(b) is one of the few mechanisms in the P&EA which safeguard this outcome by enabling a landowner to excise land area from a title earmarked in a PSP for use by the State or its receiving agencies. If the section is read narrowly, as the Commissioner has sought to do since being introduced, the ability of a landowner to achieve a net outcome is limited.  Not only is this outcome contrary to the original policy of the P&EA, but it means landowners are left to pay more GAIC than was originally intended by the legislature.

What was in dispute?

Section 201RF(b) of the P&EA specifically treats a subdivision of land as an excluded subdivision if the purpose of the subdivision is solely to provide land for transport infrastructure or any other public purpose.

The landowner in question sought to implement a road widening subdivision by creating a 0.7782 ha reserve to vest in council upon registration of the plan to be used as a public highway. The landowner argued that the purpose of the subdivision was solely to provide land for transport infrastructure.  However the Commissioner denied the landowner’s application under section 201RF(b) on the grounds that:

  • the subdivision, viewed in light of the PSP and other subdivisions that occurred immediately before and after the road widening subdivision, had two purposes: (a) to provide land for transport infrastructure; and (b) to provide land for future residential subdivision; and
  • on account of this dual purpose the subdivision was not undertaken ‘solely’ to provide land for transport infrastructure.

Following an unsuccessful objection, the landowner sought review of the Commissioner’s decision by VCAT. VCAT however upheld the Commissioner’s decision. The landowner then appealed to the Supreme Court. At issue before Croft J of the Supreme Court was whether the purpose of the road widening subdivision was ‘solely’ to provide land for transport infrastructure.

What was decided?

Croft J held that the VCAT decision (and by implication the Commissioner’s approach towards section 201RF(b) since its inception), proceeded on a ‘fundamentally erroneous basis’ and ‘misconstrued the relevant statutory provisions’.  In finding that the landowner’s road widening subdivision was undertaken for the sole purpose of providing transport infrastructure, Croft J held that:

‘the immediate and proximate purpose of the road widening subdivision was to provide land for transport infrastructure’

the fact that the road widening subdivision was a necessary prerequisite for the implementation of the [larger]residential subdivision does not make implementation of the residential subdivision a purpose of the road widening subdivision’. 

‘the fact that the road widening subdivision was entered into in order to bring about the [larger] residential subdivision does not make the residential subdivision a purpose of the road widening subdivision’. 

What does the decision mean for landowners and developers?

Since implementation of GAIC, landowners and developers have become increasingly frustrated with the impractical and restrictive reading given to section 201RF(b) by the Commissioner. The decision should hopefully change this by redefining the way in which section 201RF(b) is administered by the SRO.

At a practical level, the decision should mean that landowners and developers:

  • are no longer denied access to section 201RF(b) on the ground that a subdivision is undertaken as part of a larger residential subdivision project
  • are no longer required to pay GAIC on land area applied, or to be applied, for State infrastructure use
  • can deal with land set aside in a PSP for State infrastructure use earlier in a project without triggering a liability for GAIC on affected titles.

For those landowners and developers that have already unsuccessfully engaged with the SRO in relation to section 201RF(b), the decision also means:

  • for those that have not otherwise triggered GAIC on the affected title, they can consider resubmitting the application right away
  • for those that have triggered GAIC on the affected title regarding the denied RF(b) application (i.e. the denied subdivision was the first GAIC event), they will have overpaid GAIC and can seek re-assessment by the SRO and amendment of a staging plan by the MPA
  • for those that have triggered GAIC on a title but relating to another subdivision and not the denied RF(b) excision, they are in difficult territory.  This is because there presently is no mechanism under the legislation to retrospectively excise exempt land area after GAIC has been triggered on a title – the land area must be excised before the liability is triggered.

For those landowners and developers that have held off submitting a 201RF(b) application until the Supreme Court appeal in Frontlink had been decided, they should submit right away, before there is any talk of legislative change.

What does the decision mean for government?

As a consequence of the decision, the state government now has a clear statement on the policy intention of section 201RF(b). This should mean that:

  • the section will now be administered by the SRO in accordance with its original policy
  • the need for legislative change to section 201RF(b) is avoided.

One issue the government will however need to contend with is how it will accommodate landowners who have paid too much GAIC as a consequence of an earlier SRO rejection under section 201RF(b) and have no right of objection. In the absence of a clear mechanism in the legislation for adjusting a GAIC liability after the first GAIC event, the government may need to consider legislative reform, or some other administrative solution, to achieve a fair and reasonable outcome for landowners in this position.

This issue is compounded by the fact that most landowners (particularly developer landowners) enter into staging plans under Subdivision 4 of Part 9B to progressively pay GAIC. If a staging plan and the upfront 30 percent contribution is based on an overstated GAIC liability, then the staging plan is incorrect and the landowner is at a competitive disadvantage. The government will need to engage with the MPA to find an acceptable solution to this problem.

What does the decision mean for the MPA?

The potential impact of the decision on existing staging plans has already been highlighted. The MPA may well hear relatively quickly from two classes of landowners:

  • those denied RF(b) on an excision application that have triggered GAIC on the affected title regarding the denied RF(b) application
  • those denied RF(b) on an excision application that have triggered GAIC on a title but relating to another subdivision and not the denied RF(b) excision.

For landowners in the first category, the MPA should be able to change the staging plan once the landowner has confirmed its reduced liability with the SRO.

For landowners in the second category, for reasons already discussed, the matter is more complicated. The MPA may therefore look to the government for leadership on the issue before providing solutions to landowners.

What does the decision mean for the SRO?

At a policy level the decision should:

  • help the Commissioner better understand the policy underpinning section 201RF(b)
  • help the Commissioner interpret and administer the section in accordance with that policy.

At a business level the decision will likely mean:

  • a renewed flow of first time excision applications under section 201RF(b)
  • a series of requests to revisit earlier decisions made under 201RF(b)
  • a series of formal objections to earlier negative decisions made under 201RF(b)
  • for those objections that prove successful, refunds of GAIC in cases of overpayment, and adjustment to pre-existing staging plans based on an overstated GAIC liability.

Landowner and developer future action?

Landowners and developers that have already engaged with the SRO in relation to section 201RF(b) and received a negative response should consider what scope exists to revisit the earlier decision. As has been set out:

  • GAIC may have been overpaid
  • there may be an opportunity for a refund
  • a staging plan entered into based on an overstated liability may need revisiting.

Landowners and developers who were waiting for the outcome on Frontlink before engaging with the SRO on section 201RF(b) should consider applying for exemption as soon as possible.

Landowners and developers who have overpaid GAIC and do not currently have objection rights (because the subdivision denied by the SRO under section 201RF(b) was not the first GAIC event affecting the title), should consider contacting the Minister for Planning, the MPA or a suitable industry body to discuss their position.