The new Regional Infrastructure Charge (RIC) the NSW government was “secretly” planning to introduce should be used to fund new infrastructure and not to pump up the budget bottom line, according to Tom Forrest, Urban Taskforce CEO.
Originally introduced into the NSW Parliament as part of the budget announcement in 2021, the RIC was designed to develop a fund for the purpose of funding infrastructure to support housing supply. The legislation was referred to an upper house committee and has not been progressed by the government.
In July 2021, the Urban Taskforce appeared before the NSW Upper House Committee in July 2021 to raise concerns regarding the lack of detail or governance to ensure that the funds raised were extra funds that would be used exclusively to support additional housing supply.
Surprisingly, despite the legislation not passing the parliament, a forecast that the proposed tax would raise $924.2 million was included in this week’s 2022/23 half-year budget review, which according to Forrest, “represents nothing more than an ‘aspiration’ by the NSW Treasurer Matt Kean.”
“If the new tax is for the purpose of setting up a fund to support additional new infrastructure and additional new housing, it should not add to the government’s budget bottom line,” he said. “It should be, money comes in and infrastructure expenditure to match flows out.
“So, how is it that this additional $924.2m has been included in the government revenue side of the ledger with no plans to offset that with infrastructure expenditure? It looks suspiciously like this is a plan for a new tax to push the NSW government into a phoney surplus result (just before an election!!).”
In the latter part of 2021, a campaign of councils, led by Clover Moore, was held against the introduction of the new tax.
“Urban Taskforce was concerned to ensure that the funds raised would result in increased housing targets and additional housing supply (now even more urgently required),” Forrest said. “If the money is going into Treasury’s consolidated fund, this is nothing more than a plan for a tax.
“Urban Taskforce supports in principle the proposed move away from Special Infrastructure Contributions (SIC) to a new broadly based RIC. However, it appears that the government wants to introduce new Transport Infrastructure Charges (TIC), new Bio-diversity Infrastructure Changes (BIC) as well as a new RIC. At least with the SIC you know what you are getting in terms of infrastructure for the charges that are levied.
“In short, they plan to replace the SICs with a new RIC, TIC, and BIC!”
Forrest said the new plan also does not appear to give effect to the recommendation of the NSW Productivity Commission regarding the timing of the payment of local infrastructure contributions.
“The NSW Productivity Commission recommended that these fees be deferred until an Occupation Certificate – OC was issued by the Certifier, rather than at the start of construction as is presently the case (at the issue of a Construction Certificate – CC),” Forrest said. “This practice was adopted under the special COVID provisions and was critical to ensuring cashflow was available to assist with the funding of construction. But that legislation lapsed in March 2022. This must be part of any new proposal. The private sector’s support for the changes was always contingent on the Productivity Commission recommendations being brought in as a package and not picked apart.”
Urban Taskforce said that it will support the new RIC infrastructure fund as long as it can be certain that the new tax will clearly result in additional housing approvals and more supply.
“But if there is no clear link to additional infrastructure or additional housing targets, then this proposal will meet with strong opposition,” Forrest said.
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