Subdivision costs

Two contribution regimes, and only one of them is capped

This is the single most useful thing to know before you open a contributions notice. A council can take money from a subdivision under either of two sections, and they behave nothing alike.

A section 7.12 fixed levy is a percentage of the proposed cost of carrying out the development, and the Regulation prescribes the ceiling: nothing up to $100,000, half a per cent from $100,001 to $200,000, and one per cent above that. Those are maximums, not rates — a council can levy less.

A section 7.11 contribution is set by the council’s own contributions plan and is typically charged per lot or per additional resident, funding the roads, drainage, open space and community facilities the new lots will use. There is no percentage cap on it at all. On a two-lot subdivision it is routinely the largest single line in the budget, and it is the reason projects that pencilled out on paper stop working.

If your demand exceeds the cap, ask the right question

A contribution well above one per cent is not evidence of anything going wrong. Before treating it as a mistake, establish two things: which section the council levied under, and which plan applies to your land.

The Regulation carries its own table of named areas with higher maximums — four per cent above $250,000 on some, three per cent on others — so even a percentage levy is not always capped at one. And if the answer is section 7.11, the cap never applied in the first place. Those two questions resolve nearly every case, and they cost nothing to ask.

The holding cost nobody budgets for

A subdivision usually leaves you sitting on a vacant lot for a while — through approval, through works, through a sale campaign. Since 1 July 2019 the holding costs on that lot are generally not deductible for an individual, and that surprises people who have held investment property before.

Land counts as vacant when, at the time you incur the expense, it has no substantial and permanent structure on it — or has residential premises that are not in use or available for use, or that were built or substantially renovated while you held the land and are not lawfully occupiable, or are occupiable but not rented or available for rent. A new lot awaiting a buyer meets that description comfortably.

The costs caught are the ongoing ones: interest on money borrowed to acquire the land, land tax, council rates and maintenance. What is not caught is the cost of repairing, renovating or constructing a structure on the land, or the borrowing costs tied to that work. And the rule does not apply at all where the land is held by a company or certain trusts and funds, or where it is used to carry on a business by you or a connected entity.

So on a two-lot split funded by borrowings, the interest on the vacant half is a real cost with no tax offset behind it. Put it in the feasibility, not in the surprises.

Per lot is the number that matters

Total project cost tells you what you need to fund. Cost per new lot tells you whether to proceed, because it is the figure you can hold against what a finished block actually sells for in your street.

The ratio improves as you add lots. Survey, application and legal work barely move between two lots and three, while only the civil works and contributions genuinely scale — which is why a two-lot split is usually the least efficient version of the project you will model.