The State Taxation Further Amendment Act 2025 (Amendment Act) has introduced some important changes to the Building Act 1993 (the Building Act). 

The Amendment Act clarifies how the cost of building work is calculated for building permits and building permit levies, increases the amount of detail that is required in an application for a building permit and provides transitional arrangements so that existing applications and permits are not adversely affected by the new laws. 

Importantly, the changes to the Building Act may reduce the amount of building permit levies payable and could save developers thousands of dollars.

Background 

The Supreme Court of Victoria determined that building surveyors cannot rely solely on the construction contract price when estimating the cost of the building work for the purpose of calculating building permit levy under section 205I of the Act. Instead, the Court found that the surveyor can consider a broader range of factors beyond the contract sum when estimating the cost of the work.

This decision was later appealed, with the Court of Appeal upholding the Supreme Court's ruling.

However, the Court was not required to consider the question of what constitutes 'building work' under a proper construction of section 205I(2)(a)(i) of the Building Act.[1]

The Amendment Act seeks to address the remaining uncertainty about how to calculate the cost of building work and, consequently, the calculation of building permit levies.

Calculating the cost of the building work

Previously, the Building Act required the relevant building surveyor to estimate the cost of the building work – this formed a key issue in the May21 case.

Under the new section 3A of the Building Act, the cost of the building work will be calculated using a prescribed formula, rather than relying on estimations. The cost of the building work is calculated as follows:

the sum of the contract price of agreed or estimated amount to be paid to the builder for carrying out the building work, including the cost of labour and materials and including GST, less the cost of any chattels and any prescribed excluded items included in the contract or agreement. The formula is slightly different in relation to the building work carried out by an owner-builder.[2]

The first step is to determine the contract price or estimated cost of the building work:

  • Contract or agreement (other than cost-plus): use the contract price or agreed amount to be paid to the building (including labour and materials).
  • Cost-plus contract or agreement: use the builder’s estimated total amount likely to be received.
  • Where the work is by an owner-builder: use the owner-builder’s estimated cost (including labour and materials).

The second step is to deduct any chattels or prescribed excluded items. The term ‘chattel’ is not defined by the Amendment Act. It therefore maintains a common law meaning and is intended to exclude goods and materials that are not permanently affixed to the land or building at the completion of the building work. These deductions include GST.

The Building and Plumbing Commission has issued guidance on the types of items that would or would not be considered chattels. The types of items to be deducted or excluded from the cost of the building work include: moveable furniture, moveable kitchen appliances (such as fridges and microwaves), televisions, decorative artwork, curtains, blinds and washing machines.

For owner-builders who engage a builder for part of the work, the calculation requires them to calculate the builder’s contract price for that portion and deduct the chattels or excluded items.

The Amendment Act also enables the making of regulations that specify any prescribed excluded items. This will enable specific items to be prescribed as excluded for the purposes of calculating the cost of the building work.

Building permit applications must include more detailed information

Building permit applications (including staged permit applications) must now include more detailed information about the cost of the building work, including:

  • the contract price or agreed amount (for a contract or agreement other than cost-plus), or the builder’s estimated total amount (for a cost-plus contract or agreement);
  • the cost of any chattel;
  • the cost of any prescribed excluded items; and
  • the class or classes of building to which the work relates.

Expanded powers for building surveyors to refuse building permit applications

The circumstances under which a relevant building surveyor must refuse a building permit has been expanded to include when they are satisfied that the application does not include correct information relevant to the cost of the building work. For example, a building surveyor may refuse the application where:

  • the cost of the chattel or excluded item is substantially more than the cost normally payable for an item of that kind;
  • the application does not include all the information required; or
  • in the case of an owner-builder, the estimate is substantially lower than the cost normally payable, or the agreed amount to be paid to a builder or subcontractor is substantially lower than the price normally payable.

The Building and Plumbing Commission has the power to reassess the building permit levy after a building permit is issued, including in response to variations, incorrect calculations or misleading information.

Transitional provisions and validation

Section 288A of the Building Act includes a transitional provision, allowing applications and permits that were accepted and issued before the commencement of the Amendment Act (25 November 2025) to continue to be governed by the previous laws.

In addition, to avoid litigation on the estimation of the cost of building work and corresponding calculation of building permit levy, section 260A of the Building Act now provides that any estimates under the relevant provisions of the Building Act which applied at relevant times before 25 November 2025 are taken to be correct and valid estimates of the cost of the building work. This validation extends to the consequent calculation of all building permit levies.

However, the validation provision does not affect a proceeding relating to an estimate of building work (or calculation, imposition, collection, receipt or recovery of building permit levy) that is commenced but not determined before 15 October 2025.[3]

What this means for owners, developers and builders

These amendments will require owners, developers and builders to provide more detail in their building permit applications to include breakdowns for contract price, chattels and excluded items.

Building surveyors will be applying this information in a prescribed formula and will have expanded powers to refuse permit applications that contain inaccurate cost reporting.

Calculating the cost of the building work correctly – including the correct deductions for any chattels or excluded items (when prescribed) – can reduce building permit levy costs by thousands of dollars. In the May21 case, the building permit levy payable for the project was in the millions of dollars. The ability to exclude certain costs from the calculation of the building permit levy could significantly reduce the building permit levy that is payable for the works.