APZ’s on adjoining land, especially Council land

Ryan Post and Mark Evans • July 25, 2024

This article discusses utilising adjoining land as an Asset Protection Zone for bushfire protection purposes and a recent case which considered the use of adjoining Council land.

APZ’s on adjoining land?

It is possible in some circumstances to use land adjoining a development site for the purpose of an Asset Protection Zone ( APZ ).

An APZ is a bush fire protection measure which creates a buffer between a bush fire hazard and buildings, necessary under the Planning for Bush Fire Protection 2019 ( PBP 2019 ) .

Case law

Shoalhaven City Council v Easter Developments Pty Limited [2024] NSWLEC 49

Facts

This case concerned the creation of an APZ on adjoining Council land.

The proposed development was a three-lot subdivision of residential property. The property adjoins Council-owned land.

The required distance of the APZ was determined to be 21.5 metres. The development plan proposed that 15.5 metres of this would be on the subject site, with the remaining 6 metres on adjoining Council land.

Easter Developments (Developer) appealed the Shoalhaven City Council’s (Council) refusal of the development application to the NSW Land and Environment Court. At first instance, the Commissioner upheld the appeal and granted consent to the subdivision, finding that the proposed APZ complied with the requirements of PBP 2019 because it was managed land and had historically been managed (and cleared) by Council for this property and other properties in the street. The Council appealed the Commissioner’s decision.

The Developer argued that use of the adjoining land was appropriate as the land would be appropriately managed and maintained by Council, satisfying the requirements under the PBP 2019 for an APZ.

The Council contended that the development should be refused because the APZ was not wholly within the boundaries of the development site and that the ongoing maintenance of the APZ had not been considered, nor could it be guaranteed.

Decision

Preston CJ upheld the appeal, finding that the Council-owned land could not constitute part of the APZ, as it did not satisfy the requirements for management of land required in the PBP 2019.

If an APZ is to include part of adjoining land, which is publicly owned by a Council, there must be an adopted Plan of Management that meets the requirements of the PBP 2019. The Bush Fire Risk Management Plan in this matter did not meet the standards necessary for an APZ and was thus found not to be a Plan of Management for the purposes of the PBP 2019.

Consideration

An APZ is a buffer zone between a bush fire hazard and buildings. An APZ must be appropriately managed to minimise fuel loads and reduce the potential for a bush fire to spread and harm buildings, people, and assets. Its distance is calculated with regard to the vegetation type, slope, and nature of the building.

Preston CJ’s judgement serves as an indication that adjoining land, generally, cannot be used as part of an APZ in a development. This is clear within the PBP 2019, which provides that APZs on adjoining land are not encouraged and instead, the accepted solution is to have the APZ wholly within the land's boundaries.

An APZ must be maintained for the ‘lifetime of the development’ and, to guarantee that the APZ is appropriately managed, it is logical for it to be solely contained within the overall development site, without reliance on adjoining sites, as this ensures the standards are easily met by one party. Where adjoining land forms part of the APZ, there is no guarantee that the land will be appropriately maintained to the standard required by the PBP 2019, as there are multiple pieces of land to be maintained by different parties. This, however, does not exclude a development from using adjoining land for an APZ.

To utilise adjoining publicly owned land, a Plan of Management must be adopted and implemented by Council to act as a legal guarantee that the land will be appropriately managed. These plans must demonstrate clear compliance with the requirements of the PBP 2019. The issue for the Developer in this case was that they could not demonstrate to the Court that the adjoining land would be appropriately managed, and the requirements outlined in the PBP 2019 would be met.

The case demonstrates that the current management of the Council land is insufficient and irrelevant as to whether the land is compliant with the PBP 2019. Instead, a Plan of Management must be adopted by the council or government to assure there is appropriate management and there is a regime to ensure ongoing compliance for many years to come. The plan should include the following:

the prescribed APZ requirements; and,
the predicted timing of the management; and,
notification of arrangements for management should the land be acquired or dedicated; and,
demonstration that the relevant authority has the capacity to maintain the APZ; and,
acknowledgment of the responsibility from the adjoining landholder that the APZ will be appropriately managed.

To the question of whether an APZ can include part of the adjoining land, the general rule is that it cannot.

The judgment of Preston CJ and the provisions of the PBP 2019 clearly indicate that the preferred option is that any APZ required for a property be contained entirely within the boundaries of that land. This is to ensure that requirements are appropriately managed for the lifetime of the development.

However, there are exceptions to the rule. There are stringent requirements to ensure compliance where adjoining land forms part of the APZ. As it pertains to publicly owned land, there must be a Plan of Management and it is insufficient to argue that the land is currently managed in a way that would comply.

This is to ensure a legal guarantee that the requirements of the APZ are strictly met and all development on the land is compliant.

Key Takeaways

When developing on bush fire prone land, as a general rule, adjoining land cannot constitute part of the necessary APZ.
There are, however, exceptions to this. For publicly owned land, a Plan of Management must be created to guarantee the appropriate management of the land.
Noting this, it is insufficient to rely on the current and future management of the land by the Council or government in matters pertaining to publicly owned land, there must exist a Plan of Management.
There must be consideration of the management of adjoining land. The corresponding Plan of Management must comply with the standards outlined in the PBP 2019 and guarantee the ongoing compliance with measures of the APZ.

Require further assistance?

We have assisted many clients resolve issues with Asset Protection Zones. Some of those cases involve the Asset Protection Zone being, partly or entirely, on adjoining property.

Often resolution of the issues can be a simple matter of engaging in constructive consultation with the parties involved or the local council, or alternatively, bringing the matter before the Court for determination.

If you require advice regarding Asset Protection Zones, we can assist you in this process.

Disclaimer

The contents of this article are a general guide and intended for educational purposes only. Determination of the types of issues discussed in this article is complex and often varies from case to case and involves an understanding of matters of fact and degree. Opinions on those matters can vary and be matters on which reasonable minds may differ.

DO NOT RELY ON THIS ARTICLE AS A SUBSTITUTE FOR COMPETENT LEGAL ADVICE.

Require further assistance? please do not hesitate to call us on (02) 9145 0900 or make an enquiry below.

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NSW Biodiversity Offsets for Councils

By Mark Evans • May 4, 2025

This article provides a general overview of the NSW Biodiversity Offsets Scheme, followed by a discussion of the tax implications of establishing a biodiversity stewardship site for Councils. What is the NSW Biodiversity Offsets Scheme? The NSW Biodiversity Offsets Scheme (the Scheme ) is a market-based scheme that is administered by the NSW Department of Climate Change, Energy, the Environment and Water ( Department ) and aims to help address the loss of biodiversity and threatened species in NSW. It seeks to do so by creating incentives for landowners to improve or maintain biodiversity values as a means of offsetting impacts on other areas. The Scheme is established by the Biodiversity Conservation Act 2016 ( BC Act ) . How the Scheme works Councils can establish a ‘biodiversity stewardship site’ ( Stewardship Site ) on eligible land within NSW by means of entering into a Biodiversity Stewardship Agreement ( Stewardship Agreement ) with the Department: s 6.17 BC Act. In doing so, Councils commit themselves to enhancing and protecting biodiversity values on the Stewardship Site. On execution of a Stewardship Agreement, the Council is entitled to receive an amount of biodiversity credits which are created by the Department. The amount of biodiversity credits are calculated by the Council’s accredited ecologist (and verified by the Department) in accordance with the methodology prescribed in the Biodiversity Assessment Method ( BAM ): s 6.7 BC Act. Biodiversity credits are created in respect of existing biodiversity values on the land and management actions to be carried out in accordance with the Stewardship Agreement. A biodiversity credit remains in force unless it is cancelled or retired: s 6.18 BC Act. The market value of the biodiversity credits is calculated by the Department at the time of creation. Sale and transfer of biodiversity credits Biodiversity credits may be sold by the Council to a buyer (or in parcels to a number of buyers) seeking to offset the impact of actions detrimental to biodiversity or to permanently secure conservation outcomes. The sale price of the biodiversity credits is determined by agreement between the Council and the buyer. Alternatively, biodiversity credits may be used by Council to offset negative biodiversity impacts arising from an activity carried out under Part 5 of the Environmental Planning and Assessment Act 1979 : s 7.15 BC Act. The Council may transfer biodiversity credits to a buyer or third party: s 6.19 BC Act. The transfer is made through an application to the Department by the parties to the transfer. The transfer is not effective until the transfer is authorised by the Department and registered in the register of biodiversity credits: s 6.20 BC Act. On the registration of the first transfer of the biodiversity credits, the Total Fund Deposit ( TFD ) specified in the Stewardship Agreement (or a proportion, if not all the credits are transferred) is required to be paid by the buyer of the biodiversity credits into the Biodiversity Stewardship Payments Fund (the Fund ): s 6.21 BC Act. The TFD is a fixed amount of money used to cover the long-term management costs of a Stewardship Site. It is a calculated value representing the present value of future payments needed to fund the agreed management actions. Contracts for the sale of biodiversity credits between the Council and purchasers will state that the credit owner is entitled to the full amount of the agreed sale price of the biodiversity credits, including the TFD, and that the credit owner will have the obligation to pay the TFD. Once the credits have been ‘used’ to offset negative biodiversity impacts and to permanently secure the conservation of biodiversity, they are ‘retired’ such that they can no longer be used for any other purpose: s 6.27 BC Act. Annual payments are made out of the Fund to the Council in respect of management actions carried out in accordance with the Stewardship Agreement: s 6.34 BC Act. Management actions typically include obligations to fence areas of land, control exotic pest species, carry out bushfire management and weed management. In summary, annual payments made out of the Fund can help Councils meet the expenses they currently incur managing large tracts of land while achieving significant biodiversity conservation outcomes. Disclaimer This is a general overview of the Scheme and tax implications. The information in this article is general in nature and is intended as a guide only. It is not designed to be, nor should it be regarded, as legal or accounting advice. The business and financial structure for each landholder or entity managing a biodiversity stewardship site or conservation area is likely to be unique. Therefore, the way taxation law applies will depend on individual circumstances and you should consult a professional tax adviser before engaging with the Scheme or entering into a Stewardship Agreement. Capital Gains The ATO deems that a capital gains event (type D4) occurs on entry into a Stewardship Agreement: s 104-47(1) ITAA. The landowner makes a capital gain if the “capital proceeds” are more than that part of the “cost base” of the land that is apportioned to the covenant. Most state and federal government departments, including local councils are tax exempt: s 50.25 ITAA. GST on entry into Stewardship Agreement When the Department and the Council enter into a Stewardship Agreement, the Council makes a taxable supply by entering into the agreement in return for the biodiversity credits issued by the Department and the Department makes a taxable supply of biodiversity credits in return for the Council entering into the agreement. These are non-monetary transactions. The Department and the Council (if both are registered for GST): are required to pay GST in respect of their supply, calculated on the estimated value of the credits; and can claim an input tax credit (ITC) in respect of the tax invoice received from the other party. If a Council is registered for GST, the Department will issue a Department GST invoice and Recipient Created Tax Invoice (RCTI) on behalf of the Council when the Department sends the registered BSA to the Council. The Department will use the estimated market value of the biodiversity credits for the purposes of these invoices. As the GST payable and the input tax credit that can be claimed are the same amount, the net GST position for both the Council and Department is zero. This means that these invoices do not need to be paid. However, both the Department and the Council are required to account for the GST payment and the input tax credit in their business activity statements (BAS). Capital gains from sale or transfer of credits A CGT event (type A1) occurs upon the sale of biodiversity credits. The Council may make a capital gain or loss depending on the capital proceeds and cost base of the credits: s 104-10(4) of the ITAA. A biodiversity credit constitutes a CGT asset: s 108-5 of the ITAA. CGT event (type A1) happens when the Council disposes of biodiversity credits: s 104-10 of the ITAA. Most state and federal government departments, including local councils are tax exempt: s 50.25 ITAA. GST on sale of biodiversity credits For the purposes of GST, the sale of credits is a taxable supply of goods. This means that the biodiversity credit price should include GST that the Council then needs to pay to the ATO. Receipt of annual payments from the Biobanking Trust Fund Annual payments from the Fund made by the Department to the Council are a contractual payment for the performance of services and should be ordinary income and assessable for income tax purposes. Most state and federal government departments, including local councils are tax exempt: s 50.25 ITAA . GST on annual payments The supply of stewardship services by the Council to the Department in return for payment of the annual payment should be a taxable supply. The Department will issue a recipient created tax invoice (RCTI) and include an amount for GST when making the annual stewardship payments for management actions the Council delivers. Conclusion Councils can establish biodiversity stewardship sites on eligible land within NSW by means of entering into a Biodiversity Stewardship Agreements with the Secretary of the Department. On execution of a Stewardship Agreement, the Council is entitled to receive an amount of biodiversity credits. Biodiversity credits may be sold by the Council to a buyer seeking to offset the impact of actions detrimental to biodiversity or to permanently secure conservation outcomes. Biodiversity credits may be used by Council to offset negative biodiversity impacts arising from an activity carried out by Council. Some of the proceeds of the sale of biodiversity credits must be paid into the Fund to cover ongoing management actions and costs. Annual payments are made out of the Fund to the Council in respect of management actions carried out in accordance with the Stewardship Agreement. Management actions typically include obligations to fence areas of land, control exotic pest species, carry out bushfire management and weed management. In summary, annual payments made out of the Fund could help Councils meet the expenses they currently incur managing large tracts of land while achieving significant biodiversity preservation outcomes. Disclaimer This is a general overview of the Scheme and tax implications. The information in this article is general in nature and is intended as a guide only. It is not designed to be, nor should it be regarded, as legal or accounting advice. The business and financial structure for each landholder or entity managing a biodiversity stewardship site or conservation area is likely to be unique. Therefore, the way taxation law applies will depend on individual circumstances and you should consult a professional tax adviser before engaging with the Scheme or entering into a Stewardship Agreement.

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