Cost of building work
The cost of building work is the contract price for the building work, if there is a contract in place.
If a contract is not in place, the cost of the building work is to be an estimate by the Registered Building Surveyor (RBS).
It is the responsibility of the RBS to estimate the cost of building work for every building permit application that is received.
An RBS must advise the applicant of:
- the building permit
- the estimated cost of the building work, and
- the amount of building permit levy payable.
Providing incorrect information is an offence under the Building Act 1993.
Cost of building work and GST
The Goods and Services Tax (GST) on the cost of building materials and the cost of labour must be included when determining the cost of building work for the purpose of calculating the building permit levy.
For further information regarding GST, please refer to the Australian Taxation Office website.
Cost of building work estimate
It is the responsibility of the applicant for a building permit (including a person acting as an agent for the owner) to provide sufficient information to establish the cost of building work.
The cost of the building work is determined most commonly through the established contract price for the building work (including the cost of labour and materials). Where a contract is in place, the applicant is required to specify the contract price, including the cost of labour and materials.
The best practice is for the surveyor to request a copy of the contract or a copy of an extract that identifies the cost of building work.
If a contract is not in place, the cost of the building work needs to be estimated.
The applicant must provide sufficient information to enable the RBS to estimate the cost of the building work (including itemising the cost of labour and materials necessary to build in accordance with approved plans and specifications of the building permit, as well as the method of estimation used).
Estimating the cost of building work
Estimating the cost of the building work requires the RBS to form an opinion as to whether:
- the contract price for the building work specified is substantially lower than the price normally payable under contracts for work of that kind
- the information provided by the building permit applicant contains a statement about the cost of the building work that is false or misleading in a material particular.
In order to form those opinions, the RBS should document their process of estimation including by identifying the information relied upon. This documentation should capture:
- the estimate made by the RBS and details of evidence relied upon (copies of evidence should be retained on the building permit file)
- details of the calculation of the cost of building work
- a copy of the written notice to the applicant to the building permit file of the estimate of cost of building work and the amount of levy payable provided to the building permit applicant.
Documentary evidence may also include (but is not limited to):
- a copy of the building contract (or a copy of a relevant extract of the building contract) identifying the cost of building work
- documentation/calculations of the cost of materials and cost of labour prepared by the applicant for a building permit (where a building contract is not in place)
- for domestic building work, a warranty insurance certificate with the building contract amount identified
- building work plans and specifications
- cost of building work assessment undertaken by a suitably qualified building practitioner (i.e. a quantity surveyor)
- industry cost of building work guides etc.
To assist building surveyors check the reasonableness of the cost of building work, the VBA has created two templates that may be used by a RBS as a guide:
Building area unit of measurement
For the purpose of estimating the cost of building work, the RBS may wish to use the floor area of the building work.
Floor area is measured to the external faces of the outside of walls under the roof line. The area under the roofline does not include eaves, sunshades and awnings, connections or other isolated covered spaces unless they relate to a clearly trafficable area.
Cost of building work where the owner-builder is the applicant
Where an owner-builder is the applicant, it is their obligation to declare the correct cost of building work for which a building permit is required.
Where the actual cost of the whole or part of the work cannot be reliably determined, the levy for that work may be calculated on a reasonable market rate for work of that kind, with regard to the matters known about the work such as:
- its nature
- sourcing of materials
- the time it was carried out
- known expenditure for particular items.
The cost of building work is the actual cost to the person for whom the building work is carried out and includes costs and expenses that bear a direct and substantial relationship to the works that are payable by the person for whom the building work was carried out.
Alternatively, an assessment made by a suitably qualified building practitioner (i.e. a quantity surveyor) or reference to building industry cost guides may be appropriate. It is an offence under the Act for the applicant to provide incorrect information.
Owner’s duty to notify the VBA of final cost of works
From 1 July 2019, owners have a duty to notify the VBA of revised final costs of work. The duty to notify the VBA of the revised final cost of work applies to work carried out under a building permit issued on and from 1 July 2019:
- if the revised final cost exceeds the RBS’ initial estimate under s205I by at least $15,625; and
- when the duty holder becomes aware of the revised final cost of work (notification must be made within 28 days).
Where the owner fails to notify the VBA of a variation to building work, or where false or misleading information relating to the cost of building work has been provided, penalty levy may apply.
Notification can be provided by completing the Notification of increased building costs for building permits form and attaching any supporting documents (for example, quotes, invoices or a copy of an amended building permit).
Refusing an application
The RBS must refuse an application for a building permit where:
- the levy has not been paid
- the RBS believes that the contract price for the building work is substantially lower than the price normally paid under contracts for the type of work
- the application contains false or misleading statements about the cost of the building work. The RBS should also notify the VBA.
All documentation, worksheets and calculations prepared by the RBS in estimating the cost of building work may be subject to audit by the VBA, to ensure that RBSs are fulfilling their responsibilities under the Act.
Building permit levy calculator
Note: The building permit levy is not payable if the cost of building work is $10,000 or less.
to fund the building control system in Victoria.
to fund Victoria's dispute resolution service (Domestic Building Dispute Resolution Victoria).
payable building permit levy.
Disclaimer: This calculator provides only an estimate of the amount of levy payable. It should only be used as a guide and not relied on for decision making or levy return reporting purposes. The actual amount of levy payable to the VBA for each building permit, is verified on a case by case basis, and dependent on the VBA's review of the accuracy of supporting documentation lodged with building permit levy returns.