Estimated development cost

We have amended the EP&A Regulation to replace ‘cost of development’ and ‘capital investment value’ with a new single definition and calculation method for ‘estimated development cost’ (EDC).

The department will use the new EDC definition instead of capital investment value or cost of development across the planning system. This includes how we will determine development fees and the planning approval pathway for:

• state-significant infrastructure
• state-significant development
• regionally significant development
• local development
• complying development
• Building Sustainability Index (BASIX) certificates.

The new EDC definition was developed in response to recommendations the Independent Commission Against Corruption (ICAC) made in its Operation Dasha inquiry. The recommendations aim to prevent corruption.

The ICAC found that existing methods for determining fees and planning pathways were vulnerable to manipulation. This was because calculating the cost of a development using capital investment value and cost of development is a complicated task, with many variables. The complexity created inconsistencies and made it hard to verify results.

In response, the ICAC recommended that the department should no longer rely on cost of development and capital investment value to determine development assessment fees and the consent authority for development applications. The ICAC recommended that the department consider alternatives.

The department determined that a single cost definition would reduce opportunities for manipulation. This gives us a simple, verifiable method to calculate development cost for all purposes.
 

The new definition for EDC will apply to all applications made on or after 4 March 2024, except where savings and transitional arrangements apply (see below).

EDC estimates should capture the cost to carry out the development. This includes costs:

• to design and erect a building and associated infrastructure
• to carry out a work
• to carry out demolition of a building or work
• associated with any fixed or mobile plant equipment.

EDC estimates should not include:

• developer contributions or planning agreement costs
• cost of any development that requires separate approval
• land costs
• GST
• costs of ongoing maintenance and use of the development.

No. Cost estimates will need to include only the cost to carry out the development and prepare the development for operation at maximum capacity. The cost of ongoing maintenance or use is not included.

No. EDC excludes GST costs.

However, under changes to Schedule 4 of the EP&A Regulation that will start on 4 March 2024, you will need to add GST to EDC before calculating certain development fees for local and regional development. This will keep things the same for fees that we would have previously calculated using the cost of development method, which includes GST.

In all other circumstances, including determining planning pathways and fees for state-significant applications, you should use EDC (which excludes GST).

For this reason, the department recommends including GST as well as the sum of EDC plus GST on all cost estimates as separate line items. For local development where the EP&A Regulation requires fees to be determined using ‘EDC including GST’, the sum of EDC plus GST value provided on cost estimates should be used.

Costs calculated using EDC will be largely the same as costs calculated using capital investment value but include certain changes to improve clarity.

Costs calculated using EDC will also be largely the same as costs calculated using cost of development, except that the GST costs will be excluded.

Capital investment value and cost of development will apply to all applications made before 4 March 2024. Applications made on or after this date will use EDC to calculate development cost, except where savings and transitional provisions apply (see below).

Savings and transitional provisions will be in place for:

• development applications, including state significant development applications, submitted on the NSW Planning Portal before 4 March 2024
• modification applications, if the original development application (including a state significant development application) was submitted on the NSW Planning Portal before 4 March 2024
• state significant infrastructure projects where the SEARs request application  was submitted on the Major Projects Portal before 4 March 2024
• requests for modification of an approval of state significant infrastructure, if the original application’s SEARs request application  was submitted on the Major Projects Portal before 4 March 2024
• complying development certificate applications submitted on the NSW Planning Portal before 4 March 2024
• applications made under section 4.30 of the EP&A Act to modify a complying development certificate, if the original application for a complying development certificate was made before 4 March 2024
• applications for a Division 8.2 review submitted on the NSW Planning Portal and the fees paid before 4 March 2024.

If you make an application on or after 4 March 2024, you must use the new EDC method for determining costs, except where savings and transitional arrangements apply. 

From 4 March 2024, the department recommends that councils require applications with an EDC over $3 million to be accompanied by an EDC report. An appropriately qualified quantity surveyor who is a member of a relevant professional body, such as the Australian Institute of Quantity Surveyors (AIQS) or Royal Institution of Chartered Surveyors (RICS), must prepare these reports. The EDC report must be prepared in accordance with AIQS practice  standard available on the AIQS website , and submitted in the ‘Standard Form of EDC Report – Projects over $3million (except state significant projects)’ available above.

All state significant applications, except those covered by the savings provisions, will also be required to provide an EDC Report estimating the EDC for the proposed application from 4 March 2024. The EDC Report is to be:

• prepared using the AIQS practice standard for estimating development costs which are due to be available on the AIQS website from 4 March 
• submitted in accordance with the ‘Standard Form of EDC Report - State Significant projects’ available above
• dated no earlier than 30 days from when it is submitted.

For applications with an EDC under $3 million, we recommend a cost estimate report.

Individual councils will set specific application requirements.

From 4 March 2024, the department recommends that councils require cost estimates for developments with an EDC under $3 million. These should be prepared by a suitably qualified person (such as a builder, a registered architect, or a quantity surveyor or a person who is licensed and has the relevant qualifications and proven experience in costing of development works at least to a similar scale and type as is proposed ) and its method submitted with the application.

For development with an EDC under $100,000, the cost estimate may be prepared by either the applicant, or a suitably qualified person and its method submitted with that application.

Individual councils will set specific application requirements.

These changes create a new single method for calculating development cost. This will produce cost estimates that are more robust, objective and easily verifiable for councils.

Fees calculated under the EDC method should be in line with fees calculated under current methods.

A key difference is that EDC excludes GST, which differs to how cost of development is calculated. To address this, we have amended the EP&A Regulation to require adding GST to EDC before calculating certain fees for local and regionally significant development. This ensures that the reforms do not change the fees collected for these applications.

Because of this, the department recommends that any cost report template published by a council on its website (for development under $3 million) include separate line items for GST and EDC plus GST. This will allow councils to use a single cost report to determine fees, planning pathway or anything else that refers to EDC.

For development over $3 million, the Standard Form of EDC Reports will set out the information to be provided in an EDC report. 

The new EDC definition will not affect development levies. The department has not made any changes to section 208 of the EP&A Regulation, which sets out the method for calculating costs for the purpose of determining development levies.

We do not expect the reforms to change council processes for accepting development applications. Councils can continue to accept applications using capital investment value and cost of development estimates until 3 March 2024.

From 4 March 2024, all cost reports submitted with an application must be prepared using the EDC definition, except where savings and transitional provisions apply. 

EDC will not change fees payable or planning approval pathways for local or regional developments.

The new EDC definition is clear on its cost inclusions and exclusions, making it easier for councils or a consent authority to check if all cost elements have been correctly applied and to verify cost estimates.

The department will publish more guidance on its website closer to the start of the new EDC definition. Councils or other consent authorities may adopt this guidance to check, review and verify cost estimates and quantity surveyor reports submitted with an application.

Councils will need to check that their templates, systems, schedules and forms align with the new EDC definition. However, we expect no changes will be necessary for most councils.