Consent for Unauthorised Works

Mark Evans and William Jamieson • October 10, 2024

It is now well established that a development consent cannot be obtained to authorise works that have already been carried out. The classic example is a building that has been built without development consent.

A development application seeks approval to “carry out” development. If the building has already been built, the development has already been “carried out”.

Despite this now being well established, we are often approached by clients who are told to lodge a development application to “regularise” an illegal building.

This article dives into the issue of retrospective operation of development consents, specifically through analysis of Chief Justice Preston’s consideration of the issue in Ku-ring-gai Council v Buyozo Pty Ltd [2021] NSWCA 177 (Buyozo). Buyozo is also a useful case when considering the operation of conditions of development consents and when they are “spent” and have no further work to do.

Introduction

Ku-ring-gai Council v Buyozo Pty Ltd addresses the limits of judicial power to modify development consents retrospectively. The issue that arose in this case was whether a developer, having already complied with a monetary contribution condition, could later seek a reduction in the amount of that contribution by modifying the original development consent.

Facts

This case involved a dispute between Ku-ring-gai Council and Buyozo Pty Ltd regarding a development consent condition related to payment of a monetary contribution under section 7.11 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act). Buyozo were approved to construct a building in Pymble. Condition 30 of the development consent required the payment of a monetary contribution of $987,242.37 to Ku-ring-gai Council before a construction certificate was issued. Buyozo paid the full contribution and received the construction certificate.

After the building was completed, Buyozo applied to modify the development consent to reduce the monetary contribution by $327,162.84, arguing that an error had been made in the gross floor area calculation used to determine the contribution payable.

Buyozo appealed the deemed refusal of the modification application to the NSW Land and Environment Court. The Court (at first instance) allowed the modification, reducing the contribution amount.

Ku-ring-gai Council appealed to the NSW Court of Appeal, contending that:

The Land and Environment Court lacked the power to modify a fulfilled condition.
Modifications of development consents are prospective and cannot retrospectively impact actions that have already been completed, such as payment of a monetary contribution.

Decision

Basten and Payne JJA and Preston CJ of the NSW Court of Appeal upheld the Council's appeal, finding at [112] that a Court had no power to modify the development consent as sought in Buyozo’s application. The development consent payment condition, which had already been complied with, could not be retrospectively modified.

Consideration

Several key findings were made, relevant to development consents and retrospectivity.

Prospective Nature of Development Consent and Modifications

Development consents and modifications of development consents are inherently prospective. They apply to actions that will take place in the future.

Preston CJ noted at [37] that the current definition of “development” in the EPA Act refers exclusively to acts to be done in the future, and at [39] that:

“The essential characteristic of the grant of development consent means that a development consent cannot be granted to authorise development that has already been carried out, such as the erection of a building that has already been erected, the carrying out of a work that has already been carried out, or the demolition of a building that has already been demolished. A development consent can never retrospectively approve the carrying out of development, but can only prospectively approve the carrying out of development.”

Once a condition, such as payment of a monetary contribution, has been fulfilled, it cannot be retrospectively altered by modifying the consent. The modification powers under sections 4.55 and 4.56 of the EPA Act cannot be used to undo actions that are already completed.

No Power to Retrospectively Reduce the Contribution

Preston CJ found, at [36], that there was no power to modify the development consent to amend the payment condition, where the amount had already been paid. At [46] he outlined that:

“Once Buyozo paid the contribution in accordance with the condition, the condition had no further work to do – it no longer regulated the carrying out of the development. It thereupon became a condition that was not capable of being modified”.

Since Buyozo had already paid the monetary contribution in full, the modification of the development consent could not retrospectively alter the amount. The payment was a finalised action, and modifying the consent after the fact would be outside the Court’s powers.

Utility of the Modification

The Court concluded that modifying the development consent after the contribution had been paid would serve no practical purpose and would not alter the legal position of the parties.

Basten and Payne JJA stressed at [10] that:

“There was no proposal to modify or change in any way the development to which consent had been granted. The same building (which had already been completed) was to be used for the same purpose (which was its current use).”

Preston CJ stated at [52] that:

“The first reason [it was not possible to modify the development consent] is the general proposition… that a condition cannot be modified to require retrospectively the payment of a lesser amount of contributions than has already been paid. The second reason is a particular proposition relating to the need for a modification under s 4.56(1) of the EPA Act to effect some change to the development the subject of the development consent”

Preston CJ referenced Houlton v Woollahra Municipal Council (1997) 95 LGERA 201, at [53], describing the power to modify a development consent “as both beneficial and facultative”. Its introduction to the EPA Act supplemented, and did not remove, the right to obtain successive development consents in respect of the same land. A court can, therefore, only modify a development consent if the modification will effect some change to that development.

Preston CJ highlighted, at [64], that the development consent modification sought by Buyozo was nothing more than substituting a lesser amount in condition 30 and that:

“This modification could not effect any change to the development the subject of the development consent… If development is not changed, no question can arise of whether the development as modified is substantially the same development as originally granted; there is no utility in publicly notifying the proposed modification and considering any public submissions on the proposed modification as there is no change to the development in respect of which the public could make submissions; and there is no utility in notifying persons who made submissions on the development the subject of the original development application to invite them to make submissions on the proposed modification, for the same reason.”

The impermissible, retrospective nature of reducing a past payment and the legislative requirement of some practical change to the development to permit modification of development consent were hurdles that Buyozo failed to overcome. The Court of Appeal found that neither the Council nor the Court were able to act to modify Buyozo’s development consent and reduce the payment amount.

Key Takeaways

Development consents and modifications operate prospectively, meaning they cannot retrospectively authorise actions already completed.
The Court cannot retrospectively modify development consent conditions for actions already fulfilled, such as adjusting a monetary contribution after it has been paid.
The power to modify a development consent is limited to affecting a change in the development itself or correcting errors, not merely altering conditions.

Conclusion

Following the publication of this decision, the Department issued a circular to Councils stressing the above key takeaways. Notwithstanding, this area of planning law remains misunderstood and in many cases landowners continue to be advised to simply lodge a DA to “regularise” an unauthorised building or structure.

In most situations, the appropriate avenue may be to seek a combination of a both a development consent together with a building information certificate with respect to the unauthorised building. Landowners in this situation would be well advised to seek advice from a competent planning lawyer and town planner to navigate their way out of what can be a tricky (and expensive) exercise.

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.

NSW Planning System: Navigating Land and Environment Court

By Mark Evans • March 20, 2025

Expert Legal Insights on Development Approvals and Appeals with Planning Lawyer Mark Evans

Physical Commencement of Development Consents – Part Two

By Mark Evans • February 27, 2025

Development consents granted after 15 May 2020 face stricter requirements to determine whether they are substantially commenced and thus remain valid. This article reviews recent case law in New South Wales (NSW) and outlines the types of work that can qualify as physical commencement.