Moving local contributions from construction certificate to occupation certificate sounds like a timing tweak. Made permanent, it leaves NSW councils about $850 million short, and that gap never closes.
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On 6 November, the Minns Government committed, if re-elected, to permanently defer payment of local infrastructure contributions from the time that construction certificates are issued to the occupation certificate stage.
Councils and industry have spent the past week arguing over it. What’s been missing from the debate is the numbers.
In September I wrote in this column about NSW’s billion dollar infrastructure funding leak: s7.11 thresholds, introduced after the GFC to help developers and frozen since 2010, have suppressed an estimated $730 million in council funding capacity. The deferral opens a second, different hole.
It doesn’t change how much councils are owed. It permanently changes how much cash they hold to build the infrastructure new homes need.
And it isn’t just the Government. Shadow Planning Minister Chris Rath told an industry conference last month that a Coalition government would defer both local contributions and the Housing and Productivity Contribution to occupation certificate from July 2029. Whoever wins in March, the question is not whether councils face this gap, but who bridges it.
What actually changes
Under most contribution plans, development consents for building work typically require contributions to be paid before the construction certificate is issued. That captures most apartments, shop-top housing, infill and mixed-use development approved through a DA.
Residential subdivision is different. Contributions are usually paid before the subdivision certificate is issued, not the construction certificate. Complying development pays before work starts. Neither pathway is the target of the change.
The result reverses the usual pattern. Greenfield councils, where most growth comes through subdivision, are largely unaffected. Infill councils, where growth comes through apartments, carry most of the impact.
Why timing matters: there’s no catch-up
The intuitive view is that a deferral delays money rather than losing it: a dip, then a catch-up, then back to normal. That’s true of a temporary deferral, and NSW has run that experiment.
During COVID, a ministerial direction deferred contributions to OC for larger developments ($10 million or more) until early 2022. City of Sydney’s cash contribution receipts went from about $41 million in 2019-20 to $21 million in 2020-21, then spiked to $74 million in 2022-23 as deferred payments arrived alongside new construction certificate payments.
A permanent deferral produces the dip but no spike. Every project shifts back by the time between construction certificate and occupation certificate, about two to three years for an apartment building, and stays there. Councils permanently hold two to three years less cash from that development than they otherwise would. The money still arrives eventually, but the gap never closes.
The numbers
To size the gap, I compiled s7.11 and s7.12 cash receipts from the audited financial statements of about 40 councils, covering roughly 87 per cent of statewide receipts, and estimated the rest. NSW councils receive about $770 million a year.
For each type of council, I estimated the share of receipts currently paid at construction certificate and the typical lag between construction certificate and occupation certificate. The permanent cash shortfall comes out at:
- about $850 million in the central case, with a range of $600 million to $1.2 billion
- more than a full year of statewide contributions receipts
- about two-thirds of it in CBD and middle-ring infill councils; City of Sydney alone is around $125 million, and Western Sydney’s 13 councils around $290 million, concentrated in its centres rather than its growth areas
- very little in greenfield councils, where subdivision dominates.
The ongoing cost is the interest councils either pay to borrow the gap or forgo by not holding the cash: about $40 million a year at 5 per cent.
As in September, this is a modelled estimate, not an audited loss. It also shouldn’t be added to the $730 million threshold figure. One leak shrinks the bucket; the other delays filling it.
Who gains? Who pays?
For developers, the benefit is real but modest. Not having to finance contributions for two to three years saves roughly $4000 to $13000 per apartment, depending on how the project is funded and net of indexation. That’s around 0.5 to 1 per cent of costs: helpful at the margin, but not a game changer for feasibility.
Over time, the saving is also likely to be priced into what developers pay for land, so the lasting winners may be landowners rather than home buyers.
For councils, the deferral shifts the financing burden onto them. In principle that’s efficient: councils can borrow at about 5 per cent, while developers pay 8 to 18 per cent. But councils are discouraged from borrowing against contributions because contributions income is excluded from the operating result used in the debt service cover ratio.
If councils can’t fill the gap, the cost lands elsewhere: infrastructure is delivered later, or not at all, or existing ratepayers fund it through general revenue. None of these help get homes built.
The devil in the detail
How fast the gap opens depends on transition. If the change applies only to new consents, the dip phases in over several years. If it applies to existing consents, through a direction under s7.17 or modification applications bundling a minor change with the payment condition, it arrives almost at once.
Collection risk also rises. Payment would be a pre-occupation certificate condition, so in principle no occupation certificate issues until contributions are paid. But the occupation certificate is the last gate, with no leverage behind it. Interim and phased occupation certificates, certifiers under pressure to meet settlement dates and buildings occupied without an occupation certificate all leave gaps. This isn’t hypothetical: councils are still chasing millions of dollars deferred under the COVID direction, where apartment buildings received occupation certificates from private certifiers without contributions being paid.
Where a payment is missed, councils are left chasing development entities that may be wound up after settlement. A project that starts work and then stalls has, under current rules, already paid. Under occupation certificate payment, the council may wait years or never be paid if the building is never completed. That is a risk of real loss, not just delay.
The 2020 COVID direction prevented councils from requiring security for deferred payments. If that’s repeated, councils carry the credit risk as well as the cash gap.
Where the sector stands
Reaction has split along familiar lines. Local Government NSW has called the change “a giant loophole for dodgy developers”, criticised the lack of consultation, and proposed a $5 billion no-interest loan facility for councils instead. The Property Council has welcomed it alongside the Government’s spending timeframes and $900 million unlock of unspent contributions.
UDIA NSW supports it too, though its 2025 Unlocking Local Contributions report proposed occupation certificate payment only as a trial, paired with debt service cover ratio reform and low-cost loans for councils. The Planning Institute’s support is conditional on infrastructure delivery not being delayed, with compliance safeguards and upfront financing.
Read together, most of the sector agrees on one thing: the deferral works only if someone bridges the gap.
Plugging the hole
Councils aren’t asking for a handout. This is a cashflow problem, and the deferral can work if the Government pairs it with five measures:
- A state bridging facility. TCorp pays contributions to councils at construction certificate and collects them from developers at occupation certificate. A TCorp facility bridges the gap between construction certificate and occupation certificate, at no interest cost to councils. Developers keep the benefit, councils aren’t out of pocket, and the state borrows at the lowest cost.
- Fix the debt service cover ratio. Let councils count contributions in their plans when assessing borrowing capacity and expand low-cost loans for contributions-funded works.
- Or add a sunset. A temporary deferral gives the dip and then the recovery, as the COVID direction showed.
- Make occupation certificate collection watertight. Require payment to be verified before any occupation certificate, including interim and phased occupation certificates, and allow councils to require security.
- Publish the impact. Release council-by-council estimates of the cash shortfall before the change commences.
Housing delivery needs both feasible projects and funded infrastructure. On its own, the deferral trades one for the other. With a bridge, NSW can have both.
Estimate your council’s exposure
The statewide figure hides wide variation between councils. To help councils and their communities see what the change means locally, I’ve built a free construction certificate to OC deferral estimator.
Enter your council type and annual s7.11 and s7.12 receipts to get an indicative cash shortfall and ongoing cost of funds, with low, central and high scenarios. Councils can also adjust the assumptions to match their own development pipeline.
