Changes to the calculation of development costs commenced on 4 March 2024, with the NSW Government implementing the ‘estimated development cost’ (EDC)[1] for proposed development.

The EDC will replace ‘cost of development’ and ‘capital investment value’ to estimate proposed development costs.

In addition, State Environmental Planning Policy (SEPP) amendments will ensure planning instruments’ consistency by changing the following:[2]

  • local environmental plans for the Blue Mountains, the Central Coast, Fairfield, Liverpool, Mosman, Newcastle, Parramatta, Penrith, Ryde, Shoalhaven, Strathfield, Sydney, Tweed, Willoughby, and Wollongong;
  • State Environmental Planning Policy (Industry and Employment) 2021;
  • State Environmental Planning Policy (Planning Systems) 2021;
  • State Environmental Planning Policies for precincts Central River City, Eastern Harbour City, Western Parkland City, and Regional precincts;
  • State Environmental Planning Policy (Sustainable Buildings) 2022; and
  • State Environmental Planning Policy (Transport and Infrastructure) 2021.

Basis for reforms

These changes are in response to the Independent Commission Against Corruption’s report, Operation Dasha, which ‘recommended reform to enhance transparency and reduce risk of and prevent corruption’.[3]

The EDC is intended to reduce the opportunity for calculations used to estimate development costs to be manipulated, and it will produce more consistent and more easily verified results.[4] This is highly important given that the procedure to calculate development costs can be complex.

How costs will be calculated under the new reforms

The new amendments will provide a guide as to how development costs will be calculated in the EDC. It calls for inclusion of certain factors and for the exclusion of others. Included in the EDC will be costs associated with the following:[5]

  • the design and erection of a building and associated infrastructure;
  • the carrying out of a work
  • the demolition of a building or work; and
  • fixed or mobile plant and equipment.

The EDC will not include:[6]

  • amounts payable, or the cost of land to be dedicated or other benefit provided under a condition imposed under the Act;
  • costs relating to a part of the development that is the subject of a separate development consent or approval;
  • land costs, including costs of marketing and selling land;
  • costs of the ongoing maintenance of use of the development; and
  • GST.

However, GST will need to be added to the EDC in advance of calculating “certain development fees for local and regional development”[7] based on changes to Schedule 4 of the Environmental Planning and Assessment Regulation.

Implications moving forward

The reforms commenced on 4 March 2024, applying to development applications made from this date onward.[8] It should be noted that the reforms principally relate to amendments to the Environmental Planning and Assessment Regulation 2021 (EP&A Regulation), Environmental Planning and Assessment Regulation (Development Certificate and Fire Safety) 2021 and some environmental planning instruments.

It is important to note that the changes do not apply in certain circumstances such as development applications lodged on the Planning Portal before 4 March 2024, applications lodged before 4 March 2024 for State Significant Infrastructure (SSI), an application for a Complying Development Certificate (CDC), applications for review of a determination under Part 8 of the Environmental Planning and Assessment Act and also certain applications for the modification of a development consent, a CDC and an SSI approval.

Finally, section 251(2) of the EP&A Regulation provides that when determining fees which apply to a development application a consent authority must use the EDC contained in the development application unless the consent authority forms an opinion that the EDC ‘is not genuine or accurate’.

Proponents and developers should be cognisant of the fact that for developments with an EDC including GST of more than $50,000.00 the relevant consent authority a fee to be paid to the Planning Secretary ‘for planning reform services’.

[1] To effect this change, the Environmental Planning and Assessment Regulation 2021 will be amended by the Environmental Planning and Assessment (Estimated Development Cost) Regulation 2023 and the State Environmental Planning Policy Amendment (Estimated Development Cost) 2023.

[2] State Environmental Planning Policy Amendment (Estimated Development Coast) 2023 (NSW) Schedules 1­-2.

[3] ICAC Report – Investigation into the conduct of councillors of the former Canterbury City Council and others; recommendation 8 page 11.

[4] Estimated development cost | Planning (nsw.gov.au)

[5] Amendment of Environmental Planning and Assessment Regulation 2021 [1] inserting section 6(1).

[6] Amendment of Environmental Planning and Assessment Regulation 2021 [1] inserting section 6(2).

[7] Estimated development cost | Planning (nsw.gov.au) “Should I include GST when calculating EDC?”

[8] Subject to any applicable savings or transitional provisions.