The NSW Government has introduced a new, simpler and more transparent way to estimate development cost.
The reforms respond to the Independent Commission Against Corruption’s Operation Dasha report, which recommended changes to improve transparency and to reduce the risk of corruption.
The department will use ‘estimated development cost’ (EDC) across the planning system . This includes how we will calculate fees payable for local, regional and state-significant development, and how we determine planning approval pathways.
EDC will replace ‘cost of development’ and ‘capital investment value’.
The department is amending the Environmental Planning and Assessment Regulation 2021 and relevant state environmental planning policies to include the new definition for EDC.
We are working with professional bodies for quantity surveying on governance changes to improve the quality and consistency of cost estimates.
The reforms will apply from 4 March 2024.
Frequently asked questions
We have amended the Environmental Planning and Assessment Regulation 2021 (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 otherwise calculated using the cost of development method, which is inclusive of 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 on all cost estimates as a separate line item. For local development where the EP&A Regulation requires you to include the GST, you can use EDC plus GST.
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, with the exception 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 any:
- development application, state-significant development application, state-significant infrastructure application or complying development certificate application submitted on the NSW Planning Portal but not finally determined before 4 March 2024
- application for a Section 8.2 review made but not finally determined before 4 March 2024
- modification application, if the original development application (including state-significant development application) was made before 4 March 2024
- request for modification of an approval of state-significant infrastructure, if the original application for approval was made before 4 March 2024
- application made under section 4.30 of the Environmental Planning and Assessment Act 1979 to modify complying development, if the original application for a complying development certificate was made before 4 March 2024.
Applying the change from 4 March 2024 will allow industry and councils to prepare for the reforms and make any necessary updates to fee schedules, cost report templates or internal systems.
Industry and applicants
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 will recommend that councils require applications with an EDC over $3 million be accompanied by a detailed quantity surveyor report. A quantity surveyor certified by the Australian Institute of Quantity Surveyors (AIQS), or a quantity surveyor chartered by the Royal Institute of Chartered Surveyors (RICS) must prepare these reports.
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 will recommend that councils require cost estimates for developments with an EDC under $3 million. These must be prepared by a suitably qualified person (such as a builder, a registered architect, AIQS certified surveyor or RICS chartered surveyor) 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.
Councils
These changes will create a new single method for calculating development cost. This will create 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 will be 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 will ensure 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 a separate line item for 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 report template for model quantity surveys will include separate line items for the EDC and the GST component of the development costs. The department will publish the template on its website closer to 4 March 2024.
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 before 4 March 2024. However, we expect no changes will be necessary for most councils.
The department will publish a standard template for quantity surveyor reports that surveyors should use when preparing a cost estimate.