Recent amendments to the Planning and Development Regulation 2008, in the dying seconds before the start of the government caretaker period, do not capture the previous announcements of the ACT Treasurer and the ACT Chief Minister regarding a permanent waiver of fees to extend the building and development provision in Crown leases.
On 21 June 2012, the ACT Treasurer made a very welcome announcement at a Property Council lunch that the government would waive ‘commence and complete’ fees for commercial, mixed use and multi-unit residential developments. This announcement came on the back of an acknowledgment that the pre-GFC land banking issues have largely been resolved. For more information in relation to the history of these fees and the announcement, see our alert (Commence and complete fees - the next chapter) dated 6 July 2012). The commitment to waive commence and complete provisions for commercial properties was repeated by Chief Minister Katy Gallagher at a Property Council election debate on 26 July 2012.
Since that date, industry has been anticipating a formal amendment to the Planning and Development Regulations to give effect to the announced policy. On 13 September 2012, just prior to going into the caretaker period before the upcoming ACT election, the Planning and Development Regulation was amended.
However, the regulation does not capture the essence of the announced changes. In fact, they are not even close. Instead:
- no change has been made to the previous fee in relation to the period up to and including 21 June 2012 (the period before the Treasurer’s announcement);
- for the period from 22 June 2012 (ie immediately after the Treasurer’s announcement), a lower fee will be payable for up to a four year extension. This will be 1% of the annual rates;
- if a longer extension is required, then the prohibitive fees kick in again, being 5 times the annual rates.
What does this mean?
Let’s take an example to illustrate the effect of these changes. You own a commercial site in Canberra which you have been unable to develop due to the current economic constraints, the Crown lease required development to be completed by 30 June 2010 and your annual rates are $250,000. Having heard the announcements of the Treasurer and the Chief Minister, you may have anticipated that you would be able to extend the date for completion of the works for payment of no fee. However, under the new regulation, the fees payable by you would be as follows:
- $250,000 for the year 1 July 2010 - 30 June 2011
- $500,000 for the year 1 July 2011 - 21 June 2012
- $2,500 each year for the next 2 years after 22 June 2012. This is not a zero fee but is closer to the former administrative fee.
- however, if you were not able to complete your development by 30 June 2014, from that date the annual fee will be $1.25 million.
In considering the amounts payable, it is also important to remember that this year the amount of rates payable in relation to commercial sites has substantially increased due to the effective amalgamation of land tax and rates under the current ACT taxation reform. Effectively, at least doubling the rates figure and so too (now) the start/complete extension fee.
What should I do next?
Each property owner will need to consider how these amendments impact on their own property. If you require an extension which relates to the period after 21 June 2012, the lower, more administrative fee may be acceptable to you.
Where this is not the case, remember that this new regulation does not take away the Treasurer’s discretion under the Financial Management Act to waive any fees or taxes, including commence and complete fees. This option is still available.
However, by its nature, this power is discretionary and ad hoc and does not give the industry certainty in this important respect.
How industry will react to this in the lead up to the 20 October election will be a matter for all political parties to consider.
One thing is clear though, a fee of up to 500% of rates is a little different to a fee of zero.