Australia: State and Territory Public Transport Projects: What are the future options for value capture?

Both in Australia and abroad1, State and Territory governments are showing increasing interest in making greater use of value capture mechanisms. These mechanisms are a means of sharing the cost of public transport infrastructure projects with those members of the public who will benefit from the projects the most.

Value capture is almost universally heralded as an innovative solution to the dual challenges facing governments in the public transport space:

  • having to recurrently fund high levels of public transport services; and
  • financing the development of new major transport assets at the same time.

The Commonwealth Government in particular has championed the greater application of value capture mechanisms in project funding2.

As a result of this leadership, value capture is now firmly on the Australian project funding agenda alongside other traditional funding sources. Furthermore, it is likely that the implementation of a value capture mechanism by State or local governments will be a pre-requisite to receiving Commonwealth co-funding for infrastructure projects.

Notwithstanding these positive initiatives, the identification of a preferred value capture regime for State and Territory governments has proved elusive. Is there a model available to State governments that is sufficiently remunerative but also politically acceptable?


There are several value capture mechanisms available to each of the separate tiers of Australian governments.

Below, we address how developer contributions and betterment levies can be better utilised to subsidise the funding of public transport projects. However, there are various other mechanisms, such as funding from property development rights3, contributions from beneficiaries4 and certain charges which can be levied by the governments5.

Developer contributions

A developer contribution refers to a payment imposed on a prospective developer as a precondition for receiving development approval, or for the re-zoning of land. Local and State governments generally bear the responsibility of collecting developer contributions, pursuant to planning legislation in each state.

Unlike some other forms of value capture mechanisms, developer contributions do not provide an ongoing and regular revenue stream. While it has the benefit of enabling funds to be provided at an earlier stage, it is likely that a system of collecting developer contributions will not provide a substantial source of ongoing funding for a project into the future. However, it can be considered to be a relatively equitable method, as it shares the cost of the project with the party who generates the need for (and is most likely to benefit from) the project on the basis of enhanced land value.

Betterment levy

In general terms, a betterment levy involves the imposition of a special compulsory payment by a government over a defined area of land.

The levy assumes an increase in land value, which benefits from its proximity to the new public asset. The levy 'captures value' on the assumption that there is an increase in land value which accrues due to the land's proximity to the infrastructure asset. The funds from the levy can then be used to fund existing and future projects.

Examples in Australia include:

  • in New South Wales, the levy of a 'betterment tax' on local landowners and CBD businesses in addition to road tolls to fund the Sydney Harbour Bridge during the 1920's and 1930's;
  • in Western Australia, the Metropolitan Region Improvement Tax which is payable on land located in the metropolitan area (as well as land tax); and
  • in Victoria, a betterment levy imposed as a source of funding for the Melbourne City Loop project from 1963 to 1995.


We believe there is merit in considering the implementation of a broad based betterment levy by State and Territory Governments to assist in the funding of public transport infrastructure in Australia.

Footprint of a betterment levy

Such a levy could apply to a defined area of which the proposed public transport infrastructure is expected to benefit.

Further, the betterment levy could be applied more widely if the project's benefits extended across a wide network and city-scape and across multiple community objectives, such as reducing congestion, increasing commuter efficiency and assisting tourism objectives. For major public transport projects, such criteria would likely be met.

The extent of the 'footprint' of the levy is perhaps one of the most important areas for consideration by Government when investigating the imposition of a betterment levy.

The issue has both economic and political dimensions to it. For example, a larger footprint is likely to result in increased collected revenue, but if the levy is imposed on land too remote from the project then it may break the nexus between the perceived benefit of the project and the improved value of the land.

Legislative framework for betterment levy

The levy will require an appropriate statutory instrument enabling the levy to be implemented. For example, for a transport project in Queensland, the Transport Infrastructure Act 1994 may be considered to be the appropriate legislation because of that Act's objectives towards planning and managing the transport system. The Act would need to be amended to facilitate the implementation of the levy.

Ideally, the levy should be implemented as part of the overall long-term policy of transport delivery in the State, rather than in response to individual projects. This will ensure that the levy remains consistent and not subject to changing political environments.

Who pays the levy and how much should it be?

The way in which the levy will be applied, and the method of valuation of the levy, are important considerations.

Ideally, the levy should apply on the improved value of the land6 to ensure that enhanced land values are consistently captured.

Further, the levy is more likely to be acceptable to landowners if it is calculated and administered in a way which enables landowners to understand that the benefit in the public transport project outweighs the cost of the levy.

It would also be beneficial for the levy not to be perceived by affected parties or the public as being a 'new' tax. One option available to government would be to include the levy as an additional limb to an existing tax or impost. For example, it could form part of the existing land tax assessment undertaken annually by the Valuer General in each State or Territory.

It is also important to ensure that the imposition of the levy does not result in any perceived 'double taxation' of landowners where other taxes and levies apply to the same land. This will require co-ordination between Government entities, particularly as between the State governments and local government.

Finally, it is possible that there is likely to be increased landowner resistance to a betterment levy if the construction of the project interferes with their enjoyment of the land. An appropriate claims and compensation framework would need to be considered in the planning process for a betterment levy.


As governments explore innovative ways of project funding, the use of value capture mechanisms is likely to continue increasing in Australia and overseas.

The question of how existing mechanisms can be adjusted to suit particular infrastructure types should continue to be considered.

If the perception of affected landowners is that the combined financial impact of the public transport project and the levy result in the landowner being better off, then the concept is more likely to receive support among affected parties and members of the public more broadly.


1 The principles described in this article are, for example, likely to be relevant to public transport projects in New Zealand.

2 Recommendation 5.10 of the Australian Infrastructure Plan: "Governments should routinely consider value capture opportunities in all future public infrastructure investments. Opportunities for value capture should be identified and implemented early in planning processes, before specific options are developed, to maximise benefits to taxpayers." (February 2016).

3 Property development rights refers to a means of capturing value by selling property development rights to land which is benefited (and enhanced in value) from a project. The enhanced development potential of the land (by virtue of its benefit from the project) means property development rights command a premium sale price. An example of a project using this mechanism is Hong Kong's Metro Railway.

4 Contributions from beneficiaries refers to contributions from third parties who will gain significant benefits (financial or otherwise) from a project. An example may be a citizen who benefits from the use of a road and is required to pay tolls for using the road.

5 For example, in Queensland, the Economic Development Act 2012 enables a "special charge" or rate to be levied by the Minister of Economic Development Queensland in an area declared to be a "Priority Development Area". This charge or rate must be for a service or facility provided by the Minister or by a local Government.

6 Such an approach is similar to the calculation of land tax. It is different to stamp duty, which is subject to the fluctuations in the sale price of land.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions