Reference
On this page:
Part 5 of the Planning and Environment Act 1987 (PE Act) creates a right to ‘planning compensation’. This is distinct from the compensation that is paid when land is acquired under the Land Acquisition and Compensation Act 1986.
If you are looking for guidance to prepare a planning compensation claim, you can read the guide to claiming planning compensation.
The planning compensation scheme at a glance
What is planning compensation?
Planning compensation is a monetary sum payable to owners and occupiers of land who suffer financial loss resulting from the proposed future use of the land for public purposes. It is payable by a compensating authority, which is generally the authority that intends to acquire the land for the future public purpose. This could be a state government department, municipal council, or other public authority.
When can planning compensation be claimed?
The right to claim planning compensation under Part 5 of the PE Act arises in certain, limited circumstances.
These circumstances stem from the proposed future use of land for public purposes, such as the reservation or proposed reservation of land in a planning scheme using a Public Acquisition Overlay.
Planning compensation may be payable where the owner or occupier of land has:
- suffered actual financial loss (that is, not an abstract or hypothetical loss), and
- the loss is a natural, direct and reasonable consequence of the land being reserved or needed for a future public purpose.
In most cases, the right to claim planning compensation arises when:
- the land is sold for less than would be expected if not for the reservation or proposed reservation (known as a loss on sale), or
- a permit to use or develop the land is refused on the basis that the land is reserved or may be needed for a future public purpose (known as a permit refusal).
There are other, less common entitlements to planning compensation, including circumstances where a planning scheme restricts access to land.
Who can claim?
To be eligible to claim planning compensation, you usually need to have owned or occupied the relevant land:
- when the reservation or proposed reservation was imposed, and
- when the right to claim arose (e.g. the land was sold or the permit was refused).
There are limited exceptions to this requirement that are set out in the PE Act and the Planning and Environment Interim Regulations 2026.
If you’re unsure whether you’re eligible, please consider seeking legal advice.
How does planning compensation impact land acquisition compensation?
Planning compensation paid under Part 5 of the PE Act must be recorded in a statement on the title to relevant land. This statement needs to contain certain information, including the amount of compensation paid.
When land is acquired under the Land Acquisition and Compensation Act 1986, the acquiring authority uses a formula set out in section 41(7) of that Act to calculate the amount of compensation payable for the acquisition based on the information in the statement.
More information
You can learn more about the planning compensation scheme in Using Victoria’s Planning System Chapter 6: Acquisition and compensation.
Claiming planning compensation
The Consumer and Planning Legislation Amendment (Housing Statement Reform) Act 2025 (CPLA Act) introduced new requirements for a claim for planning compensation under Part 5 of the PE Act to:
- be made in a prescribed form, and
- be accompanied by the required supporting information.
The prescribed form for a claim for planning compensation is Form 15A in the Planning and Environment Interim Regulations 2026.
The Planning Amendment (Better Decisions Made Faster) Act 2026 built on these reforms by introducing a new claim process into the PE Act.
The Ministerial Order specifying the required supporting information to accompany a claim was published in the Victorian Government Gazette on 1 October 2026 (see pages 2,434-2,435).
Find out more about the claim process on the guide to claiming planning compensation page.
Updates to the planning compensation scheme
The Planning Amendment (Better Decisions Made Faster) Act 2026 introduced a range of reforms to the compensation scheme set out in Part 5 of the PE Act.
The changes made by the Planning Amendment (Better Decisions Made Faster) Act 2026 have not yet been included in Using Victoria’s Planning System, and will be made in a future update in 2027.
First proclamation: 3 June 2026
Section 203 of the Planning Amendment (Better Decisions Made Faster) Act 2026 commenced on 3 June 2026.
This update to Part 5 allowed the Supreme Court and the Victorian Civil and Administrative Tribunal (VCAT) to pause or reduce the accrual of interest on disputed compensation claims where there is good cause, such as where the claimant causes a delay.
This reform supports faster outcomes by encouraging earlier negotiation and resolution of claims.
Second proclamation: 28 October 2026
Further changes introduced in Part 8 of the Planning Amendment (Better Decisions Made Faster) Act 2026 commenced on 28 October 2026. These changes make clearer when planning compensation can be claimed, who can claim it, and how it is assessed.
Some of the key changes include:
- Introducing a specific process for compensation claims within the PE Act and making eligibility requirements clearer.
- Reducing speculative and hypothetical aspects of claims by:
- specifying that financial loss for a compensation claim needs to be actual loss (not abstract or hypothetical loss), and
- limiting the assumptions that can be made in the assessment of compensation about what would have been the case if not for a reservation.
- Introducing limits to additional compensation for effect on a residence and the entitlement to recover professional expenses.
- Making changes to how compensation is calculated when a permit is refused, aimed at lessening a practice of permit applications designed only to trigger compensation and never intended to be carried out.
- Removing incentives to refer matters for litigation by:
- placing an explicit onus of proof on claimants during litigation, and
- requiring all parties to make genuine endeavours to resolve claims by negotiation.
These reforms will encourage more consistent decision-making by providing greater legislative clarity. The reforms will also support faster outcomes by introducing more prescriptive requirements and procedures for the compensation claim and assessment process.
The following sections relating to compensation commenced on 28 October:
- Sections 192 to 202
- Sections 204 to 211
- Section 212 (except subsection 3)
- Sections 2313 and 214.
Section 212(3) not yet proclaimed
Section 212(3) updates the definition of a value in a formula in the Land Acquisition and Compensation Act 1986. This formula is used to calculate land acquisition compensation under that Act where planning compensation has previously been paid under Part 5 in relation to that land. This change to the definition is intended to align with a recent decision by the Supreme Court.
This subsection did not commence on 28 October 2026. It will commence at a later date.
Page last updated: 28/10/26