Third-Party Funding

A Precinct Structure Plan (PSP) is a high-level strategic plan for a defined ‘precinct’ area that sets out the preferred location of land uses and infrastructure to guide development, subdivision and building permits which is incorporated into the local Planning Scheme through a Planning Scheme Amendment 

PSPs are prepared having regard to existing features of the site and surrounds, relevant state government and council policy (including the Precinct Structure Planning Guidelines: New Communities in Victoria – October 2021 (PDF)) and the aspirations of the community. The views of landowners within the precinct are also taken into account subject to them being consistent with the above.   

Matters considered in a PSP may include the location of future activity centres, roads, cycle and pedestrian paths, heritage places, parks, waterways and other open spaces, schools, and community infrastructure.  

Once PSPs are incorporated into the relevant local Planning Scheme they are implemented primarily through subdivision planning permit applications lodged with the local council. 

Planning applications to subdivide and develop land within a precinct must be generally in accordance with an approved PSP. For further information, refer to Generally in Accordance.

Infrastructure Contributions Plans (ICP) fund the local infrastructure that will be required to support the development of a new community, as identified in the relevant Precinct Structure Plans (PSP), and determine which party is to deliver it. 

An ICP is prepared at the same time as a PSP and then incorporated into a planning scheme via a concurrent planning scheme amendment. When land within a precinct is developed, an ICP determines whether an infrastructure contribution is required to be paid by developers to fund the provision of works, services or facilities (infrastructure) and/or secure land for public purposes. 

ICPs are based on the principle that the future users of new infrastructure should pay a fair and reasonable contribution towards its provision. The cost of the infrastructure identified through the PSP which is to be recovered from landowners is generally distributed proportionally across the landholdings. 

Where an ICP is not applicable, a Development Contributions Plan (DCP) is often prepared. The DCPs are prepared in a similar manner to the ICPs.

The permitted usage of all land in each local council is determined by the local Planning Scheme. 

A Planning Scheme Amendment is an essential process for changing the planning rules that apply to an area by altering the Planning Scheme.  For example incorporation of Precinct Structure Plans (PSP) and Infrastructure Contributions Plans (ICP) into a local council planning scheme requires a Planning Scheme Amendment. 

The Planning and Environment Act 1987 sets out all the steps that must be followed to amend a planning scheme. The planning rules that apply to a precinct are included in the local municipal Planning Scheme.  

Any proposed changes to a Planning Scheme such as rezoning or incorporation of PSPs will usually be subject to public consultation and independent review. The final decision on changes to the Planning Scheme is made by the Minister for Planning.

Generally voluntary Third-Party Funding (TPF) from landowners is confined to funding Structure Plans and associated Infrastructure and Development Contributions Plan Planning Scheme Amendments. 

TPF from State Agencies or councils can fund the above and may also be used from time to time to fund other planning related projects including but not limited to Framework Plans and Urban Design Frameworks.

The Greenfield precinct boundaries were established by the Victorian Planning Authority (VPA) in 2012 to create logical and manageable ‘planning areas’ for the preparation of Precinct Structure Plans (PSP) and Infrastructure Contributions Plans )ICP). The boundaries are shown on the PSP Interactive Status Map.

The precinct boundaries are occasionally amended to reflect local planning objectives and to better facilitate the orderly planning of an area. Precinct boundaries in other areas are determined by the VPA in consultation with state agencies and the relevant local government.

The process for preparing a Precinct Structure Plan (PSP) was reviewed in 2019 as part of the VPA’s PSP reform agenda, which resulted in PSP 2.0 process being developed.   

The PSP 2.0 process sets aspirational targets for delivering a PSP including co-design of the PSP, streamlining PSP preparation and optimising the PSP product to embrace innovation, delivering government policy. 

Further information about the PSP 2.0 process can be found on the VPA website in the following document Guidance Note – PSP 2.0 – November 2021 (PDF).

Precinct Structure Plans (PSP) are complex and require a range of Technical Assessments to be undertaken to assist in delivering a robust plan.  Technical assessments and background studies are incorporated into Third-Party Funding agreement costs. The Victorian Planning Authority (VPA) procures external consultants and technical experts to complete these assessments which may include (but not be limited to) the following: 

• Biodiversity
• Aboriginal cultural heritage and values
• Bushfire
• Land capability
• Arboriculture
• Landscape & visual
• Post-settlement heritage
• Community infrastructure 
• Economic and retail
• Transport modelling
• Integrated transport
• Integrated water management
• Sodic soils
• Co-design workshops
• High level servicing and infrastructure
• Infrastructure costings and design
• Land valuations
• Public Exhibition (including Printing, advertising, engagement)
• Planning Panels (including Panel fees, legal, and expert consultants)
• Supplementary or Standard ICP costs (including Additional costings and design, legal, experts and panel fees).

Information provided by landowners and other community stakeholders is important and welcomed by the Victorian Planning Authority (VPA), as it helps to develop an understanding of the place and its history, and tests and refines the proposal for future development in the area.

The preparation of the plan can be complex and often involves trade-offs to achieve the goal of delivering overall net community benefit. The engagement forums undertaken as part of the PSP 2.0 process aim to involve all key stakeholders, (including all landowners within the precinct) in discussions about the planning for the precinct.  

While third-party contributions from landowners enables the project to proceed, in alignment with the Victorian Government Pricing for Value Guidelines and the VPAs Third-Party Funding Policy, the VPA must (and does) ensure that all landowners within the precinct have equal access to planning information, whether they are a funding contributor or not.  

Participating in the Third-Party Funding (TPF) process does not enable the funder to have a greater say in the final plan for the precinct, or to any additional access to information or to VPA staff. Relevant plan documentation will be supplied to all landowners at the same time regardless of whether they are a funder or not.

The Victorian Planning Authority (VPA) partners with councils in preparation of strategic planning outputs.  

Once a project is completed, the Responsible Authority for implementing it over many years (e.g. approving subdivision applications) will usually be the local council. To assist in facilitating this, the VPA ensures regular engagement with council throughout the whole life of the project.  

The engagement and information provided helps inform the preparation of the draft Precinct Structure Plan (PSP), Infrastructure Contributions Plan (ICP) or Planning Scheme Amendment.

Participating landowners may enter into agreements with the Victorian Planning Authority (VPA) to fund the preparation of the Precinct Structure Plan (PSP). 

The VPA carries out the following key activities to develop Third Party Funding Agreements: 

• Project is scoped to determine the project complexity and range of issues that will need to be addressed by the PSP (including required technical studies). This work involves consultation with the local council, key state agencies and internal VPA experts.   
• The VPA calculates the total estimated cost of the project, with estimates based on previous (most recent) actuals with allowances for variances based on inflation and the relative complexity of the project. 
• The estimated total cost of project is divided by the area of the precinct to deliver a per hectare funding rate.
• The area of an individual land holding is then multiplied by the per hectare $ rate to deliver a per landowner funding amount. The funding amount is GST inclusive.
• The VPA then seeks Expressions of Interest from all landowners within the precinct to enter into third party funding agreements with requested amounts based on the calculated per landowner funding amount.
• Following receipt of Expressions of Interest from landowners (and if not all landowners express interest in participating) the VPA will recalculate each landowner’s draft obligation and provide this back to participating landowners to confirm their continued interest in funding the project in accordance with the revised calculated amounts. This process may require multiple rounds of discussions and correspondence to finalise. 

The funding agreements are structured to fund all the costs that the VPA anticipates will be incurred to deliver a project in its entirety from commencement to completion of the project. This includes all costs associated with project scoping and for developing the funding agreement, procuring technical studies, stakeholder consultation, documents preparation, public exhibition, Planning Panel and associated VPA legal representation and includes the cost of the VPA’s staff for the project.  

Procurement of required contractors and consultants will occur in accordance with the VPA procurement policy and procedures. Any funds not expended will be refunded proportionally to those who contributed following project completion.

The  Victorian Planning Authority (VPA) will use its best endeavours to ensure that the project will be undertaken within the timelines set out in the work program included in the funding agreement, however as strategic planning projects are complex undertakings with many contested issues, timing will not be guaranteed.  

Similarly, funding by a landowner does not guarantee any specific land use outcome and does not confer any additional rights or entitlements to influence the content or findings of the project. Land use and development outcomes are determined as part of the preparation of the project, to achieve a net community benefit in accordance with overarching planning policies and legislation.  

For VPA projects the final decision ultimately rests with the Minister for Planning, hence no development outcome can ever be guaranteed. In addition, the VPA or the Minister at their absolute discretion can decide to pause, stop, or proceed with a project. In such an eventuality there will be no refunds of contributions already expended or committed.

The Third-Party Funding agreement enables the VPA to recover up to 125% of its original cost estimates to support cost variations without the need to amend an agreement within the ‘Limit of Liability’ clause.  

Before enacting the Limit of Liability clause, the VPA will discuss the approach with the funders and provide appropriate calculations of any additional costs and funding arrangements to be implemented. 

The VPA can provide high level information of project expenditure forecast against the original project budget on a half-yearly basis to assist in informing funders of the likelihood the Limit of Liability clause being triggered.  Such information will be based on the most recent round of VPA financial forecasts and are to be regarded as preliminary estimates only.

Where some landowners advise the VPA that they are unable or unwilling to financially contribute to the cost of the project, the cost to the remaining landowners will need to increase on a proportional basis to cover the full cost of the project. Any changes of this nature will be communicated to the potential remaining funding parties.

The Victorian Planning Authority (VPA) expects that developers and landowners with the resources to contribute will contribute their full calculated share.   

The VPA reserves the right to accept a lower than calculated contribution amount from specific landowners if it can be demonstrated that such an approach is reasonable and equitable (i.e. they are not a developer or a joint venture partner with a developer and have limited means).   

In such instances, the VPA will use its discretion to determine whether funding will be requested from other landowners to make up the difference. 

Where sufficient up-front funding cannot be secured, the VPA reserves the right to defer or not proceed with the preparation of the project until sufficient funding is available.

The Third-Party Funding (TPF) agreements request funders to contribute twice throughout the project.   

The first invoice will be issued 30 days after the funding agreement has been signed. The second invoice will be issued after Phase 2b (Submission of Co-design summary document) of the project is completed. Payment terms will be 30 days. More regular invoicing or payment plans can be considered on request of the landowner.  

The Funding agreement states that a bank guarantee is only required if requested by the Authority at or before the signing of the Agreement. In many cases  a bank guarantee is not asked for. 

All landowners and developers within a growth area declared under section 201RAA of the Planning and Environment Act 1987 (regardless of whether they have signed a funding agreement) will still be liable for Growth Areas Infrastructure Contribution (GAIC) and also for any Infrastructure Contributions Plan (ICP) regardless of any third-party contributions.  

For land outside of the declared growth areas, all landowners and developers will still be liable for any relevant development contribution plans regardless of any third-party contributions. 

For further information, refer to:

• Growth Areas Infrastructure Contribution (GAIC)
• Infrastructure Contributions Plans (ICP)
• Development Contributions Plans (DCP)

The Victorian Planning Authority (VPA) will reimburse voluntary upfront funding contributions if there are moneys unspent at the end of the project. At the end of the project contributing landowners will be provided a reconciliation of funds spent on the project.

For Precinct Structure Plans (PSP) in the outer Melbourne growth corridors, the new windfall gains tax will not apply to rezoning land to or from the Urban Growth Zone (UGZ) within existing Growth and Infrastructure Contribution areas which are subject to Growth Areas Infrastructure Contribution (GAIC).  

For more information, refer to the State Revenue Office – Windfall Gains Tax.

Commitment of Third-Party Funding (TPF) enables the Victorian Planning Authority (VPA) to program the Precinct Structure Plans (PSP) with timing certainty.  An absence of TPF creates uncertainty in relation to the timing of the PSP. 

The VPA will ask those who expressed an interest in funding the project to provide confirmation of their preferred contribution amount by a certain date. If sufficient funding is not confirmed at this stage, the VPA will re-engage with potential funders to determine if the funding shortfall can be secured by means of additional contributions from contributing landowners.  

Where sufficient up-front funding cannot be secured, the VPA reserves the right to defer or not proceed with the preparation of the project until sufficient funding is available.  

If TPF is committed later and the VPA has already reallocated its resources to other projects, then timing of commencement of the PSP will need to be rescheduled. 

In the event that the VPA is required to proceed with the PSP in the absence of full TPF, the VPA reserves the option of recovering the unfunded planning costs of a PSP through an Infrastructure Contributions Plan (ICP) or Development Contributions Plan (DCP).  It is not possible to provide an ICP/DCP credit or other offsetting recognition in relation to landowners who have already made voluntary contributions. 

The Victorian Planning Authority (VPA) undertakes work at the direction of a relevant Minister. The VPA’s work program of Precinct Structure Plans and other Strategic Planning projects is set annually via the VPA Business Plan as approved by the Minister for Planning.

The Business Plan list of projects may be amended between business plans in response to changing circumstances and subject to approval of the Minister for Planning.

The best way to stay involved in the plan development process is to register your interest in the project on the project website.  If you would like to learn more, feel free to contact members of the project team.