Infrastructure contributions reform

There is currently a patchwork of infrastructure funding mechanisms across Melbourne. Some activity centres collect funds for local infrastructure at various rates, and some collect no infrastructure funding at all. None collect funding for state infrastructure.

The expanded ICP system will allow us to apply one consistent rate across all activity centres, which will fund both state and local infrastructure.

All train and tram zone activity centres will be better off with more funding for important infrastructure such as schools, community facilities, parks, cycling links and public transport improvements.

Having a single standard rate set by the Minister for Planning also reduces the burden and cost on councils to prepare individual and very detailed Developer Contribution Plans (DCPs).

The ICP system has been used for the past decade to fund infrastructure for new communities in Melbourne’s growth areas. It provides a consistent and transparent approach that gives certainty to developers, councils and communities about how the infrastructure they will need into the future will be funded.

Existing contribution arrangements that are in place through DPCs will remain.

We have chosen and adapted the ICP system to apply to activity centres following close consultation with councils and the development industry.

ICPs collect funding for both state and local infrastructure. Local infrastructure is delivered by local councils, and includes:

• Upgrades to local roads and intersections
• Footpaths and public realm upgrades
• Active transport, including bike paths and walking trails
• Drainage
• Recreation and community infrastructure, including early childhood education, maternal and child health facilities, and community centres
• Street tree planning
• Parks, including playgrounds, shelters, toilets, landscaping, earthworks, pathways, fencing and seating.

State infrastructure is delivered by the Victorian Government, and includes:

• Upgrades to major roads, including the construction of bicycle and foot paths, and traffic signalling
• Public transport infrastructure, including more accessible bus and tram stops
• Schools
• Health facilities
• Emergency services
• Public realm improvements and street tree planning.

ICPs will not fund all of these items in every train and tram zone activity centre. We are assessing infrastructure needs in each activity centre and will work with councils to prioritise and target infrastructure spending based on community needs.

The contributions collected can only be used to fund infrastructure projects that directly benefit the ICP plan area.

• For example, funds collected from development in the Broadmeadows Activity Centre can only be used to fund infrastructure projects that directly benefit the community within the Broadmeadows Activity Centre.

The Department of Transport and Planning will prepare ICPs for proposed train and tram zone activity centres to outline the types of new infrastructure these communities need into the future and how it will be funded.

Planning permit applications lodged from 1 January 2027 proposing net additional dwellings will need to pay the contribution prior to the first milestone reached out of a certificate of occupancy or a subdivision statement of compliance. The same date applies for planning permit applications proposing net additional commercial leasable floorspace above a threshold of 100sqm or net additional industrial leasable floorspace above a threshold of 200sqm prior to a certificate of final inspection.

The ICP overlay will apply over the core and catchment areas of the 10 pilot activity centres in:

• Broadmeadows
• Camberwell Junction
• Chadstone
• Epping
• Frankston
• Moorabbin
• Niddrie (Keilor Road)
• North Essendon
• Preston
• Ringwood

Planning permit applications lodged from 1 July 2027 proposing net additional dwellings will need to pay the contribution prior to the first milestone reached out of a certificate of occupancy or a statement of compliance. The same date applies for planning permit applications proposing net additional commercial leasable floorspace above a threshold of 100sqm or net additional industrial leasable floorspace above a threshold of 200sqm prior to a building permit’s certificate of final inspection.

The ICP overlay will apply over the core and catchment areas of the expanded Train and Tram Zone Activity Centre program in 48 locations:

• Armadale Station
• Ashburton Station
• Auburn Station
• Bentleigh Station
• Blackburn Station
• Brunswick Station
• Carnegie Station
• Caulfield Station
• Coburg Station
• Dandenong Station
• Darling Station
• East Malvern Station
• Elsternwick Station
• Gardiner/Glen Iris Station
• Glen Huntly Station
• Glenferrie Station
• Hampton Station
• Hawksburn Station
• Hawthorn Station
• Heidelberg Station
• High Street (Thornbury)
• Holmesglen Station
• Hughesdale Station
• Kew Junction (tram)
• Malvern Station
• Mentone Station
• Middle Brighton Station
• Middle Footscray Station
• Mitcham Station
• Murrumbeena Station
• Noble Park Station
• North Brighton Station
• Nunawading Station
• Oakleigh Station
• Ormond Station
• Prahran Station
• Riversdale/Willison Stations
• Sandringham Station
• South Yarra Station
• Springvale Station
• St Georges Road (Thornbury)
• Toorak Station
• Toorak Village (tram)
• Tooronga Station
• Tottenham Station
• West Footscray Station
• Windsor Station
• Yarraman Station

Councils will be the collecting agencies for train and tram zone activity centre ICPs, meaning they will collect infrastructure contributions directly from developers for each new home or commercial/industrial space within the ICP area.

Each council will keep two thirds of the infrastructure contributions it collects to fund local infrastructure, and will provide one third to the Victorian Government to fund state infrastructure.

While the ICPs for proposed train and tram zone activity centres will identify the types of infrastructure projects that will be funded, they will not prescribe specific infrastructure projects. Once we apply an ICP to an activity centre, the local council can decide exactly which projects to spend its contributions on via its own annual council budget and capital works program. For example, an ICP may outline that the community will need upgraded local parks. The local council can then decide which specific parks it would like to upgrade. This gives councils greater flexibility to adapt to the changing needs of their communities, and to apply their expert knowledge about each area’s local needs.

No council will be worse off, with the contribution rate being much greater than existing arrangements in all but two proposed train and tram zone activity centres.

Where there is an existing DCP n in place to fund the same infrastructure, the council component of the new ICP levy will be reduced.

The rate will be indexed annually to account for growth in input costs for infrastructure using the Australian Bureau of Statistics producer price indexes for road and bridge construction and non-residential building construction in Victoria.

All existing greenfield ICPs and development contributions plans are indexed in a similar manner.

Our initial reforms focus on changes to locations where most new housing will occur, in tram and train zones, creating a simpler and more flexible system that will increase infrastructure funding for these growing communities.

We have been working closely with councils and industry representatives on our Infrastructure Contributions Working Group on state-wide reforms to infrastructure contributions. The Working Group’s advice will inform considerations for broader state-wide reforms in the longer term.

As part of our revision of the Planning & Environment Act, we are updating the ICP system to provide councils with more flexibility for how councils collect and spend infrastructure contributions.

Our reforms allow ICPs to fund land acquisition in addition to works and services.

These reforms also provide flexibility to fund projects that service an ICP area, even if the infrastructure is not within the ICP boundary. For example, ICPs may fund a new community centre whose catchment will extend into the activity centre, even if the centre is not within the ICP plan area.

Under the proposed changes, infrastructure and facilities can be funded outside of the proposed train and tram zone activity centres area if they cannot reasonably be provided in the ICP plan area, but are related to development in the ICP area.

This is necessary due to the limited land availability within activity centres and the prioritisation of housing, which may limit the capacity of the plan area to deliver all necessary services wholly inside the precinct.

The arrangements for the Inner Melbourne areas in the City of Melbourne and City of Yarra are subject to further engagement with those Councils.