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Alert: Growth Areas Infrastructure Contribution

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The Growth Areas Infrastructure Contribution (GAIC) outlined in the Melbourne @ 5 million publication confirms that an infrastructure contribution of $80,000 per hectare will be applied to land which was brought into Melbourne’s Urban Growth Boundary (UGB) IN 2005. For any land brought into the UGB in or after 2009, a simple flat-rate charge of $95,000 per hectare applies.

When will the GAIC be collected?

The GAIC will apply and be generally triggered by the first to occur of:

  1. Purchase/transfer of the land; or
  2. Subdivision; or
  3. Issuing of a building permit for major building works.

Whichever trigger event occurs first will determine who pays the GAIC

If the triggering event is the subdivision of the land or the issuing of a building permit, the vendor will be required to make the payment.

If the trigger event is the purchase, the purchaser will be liable for the payment.

There are potential issues for the vendor if the land is required to be subdivided prior to the sale. This will require the vendor to pay the GAIC before the receipt of funds from the sale. The vendor may not have the funds to meet the contribution payment until settlement has occurred.

Additionally there is no guarantee that the purchaser will not default under the contract of sale. In this case, if the vendor had to pay the GAIC when lodging the plan of subdivision (or obtaining a building permit), the vendor will have incurred an expense without any prospect of reimbursement from the balance of the proceeds of sale.

Pre-Existing Sales Arrangements before 2 December 2008 (or 19 May 2009)

Buyers or sellers of land who have a pre-existing binding sale arrangement (binding on the seller, buyer or both) before 2 December 2008 (or 19 May 2009 for the additional investigation area) – are not required to pay the GAIC on settlement of that transaction. However, the next relevant property transaction, subdivision or development relating to the property will attract GAIC.

Areas Affected

The land that the GAIC will apply to includes areas brought into Melbourne‘s Urban Growth Boundary (UGB) in 2005 and 2006 and land in the recently announced Investigation Areas which is subsequently brought into the UGB in or after 2009 and that is zoned for urban development.

Section 32 Disclosure Requirements

Land attracting the GAIC will have a notice recorded on the title advising that the GAIC is payable. This obligation will be removed from the title once the GAIC has been paid, or the land is no longer subject to the GAIC.

This will raise the obvious disclosure requirement under Section 32 of the Sale of Land Act 1962 (Vic). The Law Institute of Victoria has rightly requested that the contribution notation on title should not be removed but be shown as struck out so parties searching the title can determine whether or not the property was subject to the contribution and whether or not the contribution has been paid.

This alert will be updated and information will be provided to our clients once there is further development in this area. Should you wish to discuss the matters raised in this article please contact John Turnbull or Mark Kemp of our Commercial Property Team.

Author: Daimon Goto