There are three mechanisms available under the EP&A Act to allow councils to require contributions towards local infrastructure. These are:

• section 7.11 contributions
• section 7.12 levies
• planning agreements.

Councils must decide the most appropriate mechanism for their circumstances as they are ultimately responsible for the delivery of local infrastructure in their local government area. This module provides guidance on when to use each mechanism, as well as other funding sources councils should consider when planning for and providing infrastructure.

Councils should consider the circumstances of their local government area, the nature of development, type and amount of infrastructure needed and the resources available for managing the contributions before deciding which mechanism to use.

• Councils can use a combination of mechanisms in their local government area and this can change over time as the development profile of the area changes.
• Not all types of infrastructure can be funded through every mechanism. Councils should consider the infrastructure needed when choosing the appropriate mechanism.
• Some mechanisms can only fund part of the infrastructure costs, and councils will need to use a mix of funding sources.
• Councils should also consider the staff, resources and time they have available to manage the contributions process.

Infrastructure contributions can only be required through the contributions system 

The mechanisms available under Part 7 of the EP&A Act are the appropriate way for councils to require contributions for local infrastructure. Councils should not pursue contributions schemes through development control plans or local environmental plans (other than affordable housing contributions). This ensures the infrastructure contributions system is transparent and consistent.

Section 7.11 contributions are usually most appropriate in greenfield or significant infill areas where the rate and type of development are more predictable and there will be a significant increase in demand for infrastructure created by development. They are also more appropriate where the high cost of infrastructure justifies the significant resources needed for section 7.11 contributions planning and the ongoing management of these funds.

This type of plan requires the council to demonstrate the nexus between the development and the demand for infrastructure. Councils must apportion costs so that the development is only paying for the demand it creates. If the apportionment isn’t 100% attributed to the new development, councils will need to fund the part of the cost of infrastructure that benefit existing residents from other funding sources, such as rate revenue or grants. However, a section 7.11 plan can create more certainty around infrastructure funding because, after taking into account apportionment, this type of plan can fund the full cost of the infrastructure. 

When to use section 7.12 levies

Section 7.12 levies are a flexible mechanism that can be used in a broad range of situations. They generally have lower rates of contributions, but this is offset by greater flexibility in expenditure and administrative efficiency. 

Section 7.12 plans are useful in situations where it can be difficult to determine the types of future development and activities, the rate at which development will occur, and where it will occur, making detailed infrastructure contributions planning difficult. For example, in areas experiencing low or unpredictable rates of development, or areas with a significant commercial or industrial development component. 

These plans have less certainty than section 7.11 plans because the contribution is based on a set percentage charge on the cost of development, rather than being based on the cost of infrastructure as section 7.11 plans are. They are not necessarily intended to recover the full cost of the infrastructure needed in an area, but act as a simple mechanism to collect contributions towards this infrastructure. 

When to use planning agreements 

Councils can use planning agreements in a wide variety of circumstances, set out in section 7.4(2) of the EP&A Act. Planning agreements tend to be more successful where there is a large landowner who wants to coordinate and deliver infrastructure at the same time as the development. Agreements can offer different and better outcomes through efficiencies in the development and infrastructure construction process or through innovation.

However, councils must consider whether the outcomes of a planning agreement are worth the effort and administration required to negotiate and implement an agreement. 

Comparing the different mechanism

Infrastructure should be funded from multiple sources 

Contributions plans generally only fund a proportion of the full cost of the infrastructure provided by councils, for example because some of the cost may have been apportioned to existing development. Councils will need other funding sources for the portion of infrastructure that will service existing demand and the cost of running and maintaining the infrastructure. 

Different sources can be used in combination. Councils should consider sources of funding such as rates, federal and state grants or subsidies. It may also be appropriate to have user charges for some local infrastructure.

Councils must ensure that they do not ‘double-dip’ when using multiple sources of funds. Double-dipping is where the same component of an item is funded twice, for example through the collection of contributions and through a grant. 

Although all three mechanisms are shown within the same process map, this is unlikely to be the case in practice. Planning agreements are a complementary mechanism to contributions plans and are often considered at the level of an individual development, while contributions plans are considered early and at a catchment or local government area wide level. 

This simplified map aims to demonstrate the key differences.