Tiny Homes, Caravans and Manufactured Homes in NSW Planning Law (Part 2)

Mark Evans • November 27, 2024

In Part 1, we considered tiny homes and caravans on private land. That article can be accessed here Part 1. In Part 2, we turn our attention to tiny homes and manufactured homes.

Manufactured homes are generally constructed off-site and transported to a site where they are installed, either on a slab or on piers. Typically, but not always, they will be connected to existing stormwater and electrical infrastructure on the site. Tiny homes, kit homes, and modular homes can all be grouped under the definition of manufactured home if they share the traits of being self-sufficient, transported to a site as a whole or in major sections and fixed to the land.

The type of structure and degree of fixation to the land are important. Legislation in NSW makes a distinction, firstly between a structure on wheels and capable of being registered (a caravan) and a structure that is constructed in sections and installed permanently onsite (a manufactured home).

How are manufactured homes different from a traditional dwelling?

This question relates to the structure, not the use of the dwelling.

The legislation draws a distinction between something that is constructed mostly onsite (traditional dwelling - governed by the EPA Act) and something that is constructed mostly offsite and transported to the site in “major sections” (manufactured home - governed by the LG Act).

Development consent under the Environmental Planning and Assessment Act 1979 (EPA Act) is required for the construction of dwelling on a site, that is not a moveable dwelling. The EPA Act governs traditional structures and construction methods involving erection of a building onsite. Moveable dwellings are governed by the Local Government Act 1993 (LG Act), not the EPA Act. A caravan or a manufactured home falls under the definition of a moveable dwelling.

Let’s explore that distinction further.

Development consent is required under the EPA Act for “development”. Development is defined broadly in the EPA Act and includes the erection of a building:

1.5 Meaning of “development”

(cf previous s 4)

(1) For the purposes of this Act, development is any of the following—

(a) the use of land,

(b) the subdivision of land,

(d) the carrying out of a work,

(e) the demolition of a building or work,

(f) any other act, matter or thing that may be controlled by an environmental planning instrument.

But what is a building you may ask?

The definition of “building” in the EPA Act is broad:

“building includes part of a building, and also includes any structure or part of a structure (including any temporary structure or part of a temporary structure), but does not include a manufactured home, moveable dwelling or associated structure within the meaning of the Local Government Act 1993.

There is extensive case law regarding what may be a “building” or a “structure” in planning law. If you are interested in this topic, you can read our article. [What is a “building” in planning law – and when is consent required?]

Importantly, the definition of “building” in the EPA Act excludes a manufactured home and a moveable dwelling as defined in the LG Act. This is why the distinction between a traditional building constructed onsite and a manufactured home transported to a site is important.

Let’s turn our attention to the definition of a manufactured home.

Manufactured Home

A manufactured home is defined in the LG Act as a:

“self-contained dwelling (that is, a dwelling that includes at least one kitchen, bathroom, bedroom and living area and that also includes toilet and laundry facilities), being a dwelling—

(a) that comprises one or more major sections, and

(b) that is not a motor vehicle, trailer or other registrable vehicle within the meaning of the Road Transport Act 2013,

and includes any associated structures that form part of the dwelling.”

A manufactured home must be a “dwelling”. There is a long history of case law concerning the definition of a “dwelling”. The use of the word in the definition requires that a manufactured home be intended for use as a domicile, or where someone lives permanently. Pepper J summarised and reviewed the case law on this issue in Dobrohotoff v Bennic [2013] NSWLEC 61.

Her Honour stated at [45]:

“Furthermore, when considering the first limb of the definition of "dwelling", regard must be had to the notion of "domicile" contained within it (820 Cawdor Road at [24]), and the critical element of permanence. Inherent within the term "domicile" is, as a long line of authority in this jurisdiction has established, the notion of a permanent home or, at the very least, a significant degree of permanence of habitation or occupancy…”

Secondly, the manufactured home must be a “self-contained” dwelling containing a bedroom, living room, kitchen, bathroom and laundry. Sometimes, in a studio arrangement, these will all be contained in a single space.

Thirdly, a manufactured home must “comprise one or more major sections”. This picks up the idea that a manufactured home is manufactured offsite and may arrive as a complete unit or in sections that are installed onsite.

Finally, a manufactured home must not be a motor vehicle, trailer or other registrable vehicle. This excludes campers, trailers and importantly, caravans from the definition of a manufactured home.

What is required to install a tiny home or manufactured home onsite?

Generally, two things will be required. First, an application under s 68 of the LG Act will be required to install the manufactured home on a site and connect into services like power, water and sewage. Secondly, development consent may be required for the use of the manufactured home as either a home office or secondary dwelling.

Installation of the manufactured home is governed by the LG Act, not the EPA Act.

Section 68 of the LG Act specifies the “activities” that require the approval of council. One of those “activities” is the installation of a manufactured home, moveable dwelling or associated structure on land. Other “activities” for the purposes of section 68 are carrying out water supply connections, carrying out sewerage work and stormwater drainage work. So, a section 68 approval is required for the installation of a tiny home or a manufactured home and (usually) water supply, sewerage and stormwater work.

In addition, development consent for use of the manufactured home will be required. This can either be in the form of an application for development consent to Council, or in some circumstances, to a private certifier as complying development. It will save time and cost to make both the s 68 application and the development application at the same time.

A competent town planner should be engaged to clarify what is required to accompany each application and to assist with managing the various consultants and any reports that are required.

So that deals with the installation of a manufactured home. But what about its use?

Physical structures vs use

The installation or construction of a structure is one thing, the use of that thing in planning law is another. This is best illustrated through an example. A manufactured home might be installed on a site for use as a home office or granny flat (in planning law a “dwelling”). Following installation, the granny flat might be used to house an aging parent or a university student. The structure is a slab, four walls and a roof. But the same structure can be put to many different uses. After the aging parent or university student moves out (hallelujah) that same granny flat could be converted into backyard commercial pub. Same building, same structure, vastly different use (and impact on the neighbours). This is an extreme example, but it highlights the distinction between a structure and its use.

So it may be lawful to ship a manufactured home to a site and install it onsite, but consent may still be required for the proposed use of the manufactured home on the site. Before installing the manufactured home onsite, the first question to consider is the zoning and whether the proposed use is permissible within the relevant zone.

Zoning

Almost all land in NSW has a specific zoning, for example R2: Low Density Residential zoning or RU1: Primary Production.

The zoning of a site can be easily obtained through NSW government websites (https://www.planningportal.nsw.gov.au/spatialviewer).

Once the zoning has been obtained and understood, we can look to the relevant Local Environmental Plan for the “land use table” relevant to the zoning.

Land use tables look like this:

The “land use table” for a specific zone will describe a number of land uses that are:

(i) permitted without consent

(ii) permitted with consent; and

(iii) prohibited.

We can see in the above land use table that dual occupancies and dwelling houses are permissible in the zone (with consent). Any use that falls outside “permitted without consent” or “permissible with consent” is prohibited in the zone.

To determine which of these three categories the proposed use falls into, we must first define the use.

How do we properly define the use?

Tiny homes or manufactured homes installed on a site will typically be used as a “secondary dwelling” which is defined in the LEP as “a self-contained dwelling that is established in conjunction with a principal dwelling.” A granny flat would be permissible (with consent) in the above R3 Medium Density Residential zoning because it could fall under the definition of “multi dwelling housing” which is defined in the LEP as “3 or more dwellings (whether attached or detached) on one lot of land, each with access at ground level.”

Characterisation of use can get quite complex but we don’t need to go into that detail in this article. If you are interested in this topic, you can read our article at [Characterisation of Use in Planning Law].

Recall our two examples above. If the same granny flat is to be used as a dwelling, the use is permissible (with consent) in the R3 zone but the use of the granny flat as a commercial pub (food and drink premises) is prohibited in the zone.

Conclusion

The installation and use of a manufactured home on a site should be relatively straightforward. But, it pays to engage a competent town planner to check the site, the proposed use and the zoning before proceeding to ensure the installation and use are permissible on the chosen site.

This article considered the installation of tiny homes and manufactured homes on private land in NSW. Part 1 of this article examined tiny homes and caravans and can be accessed here: Part 1

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.

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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

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Physical Commencement of Development Consents – Part Two

By Mark Evans • February 27, 2025

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