What’s that ‘new’ levy on my title?

You may not be aware, but there may be a ‘new’ levy on your title!

On 1 July 2020, the Melbourne Strategic Assessment (Environment Mitigation Levy) Act 2020 (Vic) (MSA Act) came into effect. It imposes an obligation to pay a levy prior to certain works being undertaken in specified areas of Melbourne’s growth corridors (Environmental Mitigation Levy). The Environmental Mitigation Levy is registered on title, much like a GAIC notice.

The Environmental Mitigation Levy replaces the habitat compensation fees that were payable under the Biodiversity Conservation Strategy and associated sub-regional species strategies (Habitat Compensation Framework). Although the Environmental Mitigation Levy will only impact those properties that were already subject to the requirements of the Habitat Compensation Framework, the levies payable have increased, and the mechanisms for payment have changed significantly.

The MSA Act does not apply retrospectively (meaning the MSA Act only applies to events that occur after 1 July 2020). However any payments made under the Habitat Compensation Framework are deemed payment of the Environment Mitigation Levy and, in these circumstances, the levy is discharged for the area of land under which the levy was paid.

History of the Habitat Compensation Framework

Under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act), Commonwealth approval is required prior to undertaking any development that might have a significant impact on matters of national environmental significance. Melbourne’s growth corridors contain significant areas of land that are considered to be of national environmental significance, including habitat for threatened species and ecological communities.

To streamline the approvals process and avoid the inevitable delays in obtaining Commonwealth approval under the EPBC Act, the Melbourne Strategic Assessment Program (MSA Program) was introduced with the approval of the Commonwealth Minister for Environment. The MSA Program acts as a blanket approval under the EPBC Act for development in Melbourne’s growth corridors, where that development complies with the MSA Program.

One aspect of the MSA Program was the introduction of the Habitat Compensation Framework which sought to raise money to fund mitigation measures for impacts on biodiversity caused by the development of these growth corridors.

Affected land

The Environmental Mitigation Levy only applies to areas declared by the Secretary of the Department of Environment, Land, Water and Planning (DELWP) as levy areas in accordance with section 10(1) of the MSA Act, and currently impacts land within Cardinia, Casey, Hume, Melton, Mitchell, Whittlesea and Wyndham that would have been subject to a habitat compensation fee under the Habitat Compensation Framework.

A map of the declared areas can be found here.

Levies

From 1 July 2020 the rates for each levy type have increased and the levy rates will be adjusted annually according to a tailored composite index composed of CPI and wages index.

The levies payable under the Habitat Compensation Framework and Environmental Mitigation Levy are shown below:

In certain circumstances, it may be possible to reduce the levy / levies payable where a landowner transfers privately held conservation area land to the Crown.

Land will only be subject to the Environmental Mitigation Levy once, and fees that have been paid under the Habitat Compensation Framework will satisfy the obligations under the Environmental Mitigation Levy.

Trigger events & exclusions

Unlike the Growth Areas Infrastructure Charge (GAIC), the Environmental Mitigation Levy is not triggered by a transfer of land. Rather, it is only triggered when any of the following events occur:

• issue of a Statement of Compliance for a plan of subdivision;
• application for a building permit;
• approval for a work plan or variation of a work plan under the Mineral Resources (Sustainable Development) Act 1990;
• construction of utility infrastructure on Crown land; and
• construction of a road on Crown land.

The Environmental Mitigation Levy is only applied once to a parcel of land. Even if a trigger event occurs again in respect of that same land, the MSA Act does not impose any further levy liability in respect of the land.

Sections 5, 6 and 7 of the MSA Act outline some events which are excluded from payment of the Environmental Mitigation Levy including smaller subdivisions (i.e. boundary realignment).

Paying the Levy

The payment process for Environmental Mitigation Levy is very similar to GAIC. Where the Environmental Mitigation Levy is triggered by the issuing of a Statement of Compliance for a plan of subdivision:

• DELWP will issue a levy assessment notice to the landowner (or lodging party) via email;
• once the levy amount has been paid, DELWP will issue the appropriate certificate to the landowner (or lodging party) (i.e. a certificate of release or partial release); and
• the certificate must then be presented to Land Use Victoria to evidence that payment was made – Land Use Victoria will not accept lodgement of the plan of subdivision unless the certificate is provided.

Liability to pay the Environmental Mitigation Levy runs with the land. This means that if a property is sold and all or part of an Environmental Mitigation Levy is outstanding at settlement, the purchaser will become liable to pay that outstanding amount, even though the trigger event occurred during the seller’s ownership. Depending on the nature of the purchase, the purchaser should consider and set out under the contract who is liable for the Environmental Mitigation Levy.

Can payment of the levy be staged?

The MSA Act permits staged payment of the Environmental Mitigation Levy. An application for staged payment must be submitted to DELWP before the time the levy is payable. If DELWP approves the staged payment application, DELWP will issue a certificate of staged payment approval setting out the due dates for each stage.

Existing staged obligation agreements under the Habitat Compensation Framework made before 1 July 2020 will be converted into a staged payment approval. The MSA Act provides that the Secretary must give written confirmation that staged payment regime has been converted within 14 days of the commencement of the MSA Act (i.e. by 15 July 2020).

Transitional issues

Our team have identified some transitional issues since the Environment Mitigation Levy came into effect on 1 July 2020. For example, the Environment Mitigation Levy has been incorrectly applied to individual registered lots. This means that the Environment Mitigation Levy is incorrectly registered on subdivided titles across a number of developments within the Levy Area. DELWP have acknowledged this error and are working with Land Use Victoria to remove the Environment Mitigation Levy incorrectly registered on subdivided titles.

Key takeaways

• If you are an owner of land or developer and your land appears to fall within the ‘levy area’ we recommend obtaining a current title search as the levy should be recorded on the title (if it is applicable).
• Just like GAIC, payment and timing for release of the Environmental Mitigation Levy needs to be taken into account when obtaining statement of compliance for a plan of subdivision.
• If you are a vendor, it is important to note that the vendor has an obligation to disclose the new levy in an existing contract of sale (not yet entered into) or new contract of sale.
• If you have previously entered into a staged payment regime under the Habitat Compensation Scheme and not received written confirmation that the staged payment regime has been converted under the new legislation by 15 July 2020, we recommend contacting the DELWP. In addition, all ‘S’ lots should be reviewed to ensure that if the staged payment obligations under the Habitat Compensation Scheme have been satisfied, that the Environment Mitigation Levy is not on the ‘S’ lot title.
• If you are a purchaser and a trigger event has occurred in relation to the property being purchased prior to settlement, you should consider the nature of the acquisition and set out under the contract of sale who is liable to pay the Environmental Mitigation Levy.

Authored by:

Brihony Boan, Partner
Rachel Yard, Lawyer
Zoe Christodoulou, Lawyer