Cladding rectification levy FAQs

The cladding rectification levy (CRL) changes commence on 1 February 2021 and will apply retrospectively from 1 January 2020.

The CRL changes will affect building permit number (BPN) applications accepted by a Relevant Building Surveyor on or after 1 January 2020.

From 1 February 2021 the CRL will apply to all building permit number (BPN) applications submitted through BAMS on or after 1 January 2020 that meet the following criteria:

• The Building Permit is for a building:
• that is not, or will not be, in regional Victoria
• that is, or will be of any of classes 2 to 8; and
• that has a cost of building works that relate to class 2 to 8 of $800,000 or more.

CRL may be payable if a Building Permit Number (BPN) application submitted through BAMS on or after 1 January 2020 meets the following criteria:

• The Building Permit is for a building:
• that is not, or will not be, in regional Victoria
• that is, or will be of any of classes 2 to 8; and
• that has a cost of whole of building works of $800,000 or more.

You may be entitled to a refund of CRL paid on certain building works if you paid the building permit levy before 1 February 2021.

In order for the VBA to calculate the total amount of CRL owed, you must provide the estimated cost of works (CoW) breakdown by Building Codes of Australia (BCA) Classification. If the amount owed is less than what you’ve already paid, you may be entitled to a partial CRL refund.

You must provide a breakdown of the estimated cost of works (CoW) by each BCA Classification of the building works in BAMS. This will allow the VBA to calculate the CRL for components of the building works that relate to Classes 2 to 8.

If you are eligible for a levy exemption, please notify your Relevant Building Surveyor so they can indicate the exemption on the Building Permit Number application.

For Building Surveyors seeking guidance on how to apply for a levy exemption, please refer to the BAMS Building Surveyor User Guide.

For all other enquiries, please contact BAMS@vba.vic.gov.au

The cladding rectification levy applies to buildings:

• that are not located in 'regional Victoria' as defined in section 18(8) of the First Home Owner Grant Act 2000; and
• that is, or will be of any of classes 2 to 8 under the National Construction Code (NCC); and
• that have a cost of works or cost of whole of building works of $800,000 or more.

Note: The cladding rectification levy is payable in addition to the current building permit levy.

As provided by Building Code of Australia (BCA) – A6.11, a building (or part of a building) may be designed, constructed or adapted to multiple purposes and have more than one classification.

An application for a building permit must specify the CoW and the following information:

• whether the building work relates to more than one class of building,
• if the building work relates to more than one class of building, it must specify each class of building that the building work relates to; and
• if the building work relates to more than one class of building, and those classes of building include one or more class of 2 to 8 and a class 1, 9 or 10 building, it must state:
• the cost of the building work that relates to the class or classes of 2 to 8 building; and
• the cost of the building work that relates to the class 1, 9 or 10 building.

Example

Under the current provisions, when constructing a Class 9 - health care facility, combined with Class 7 - Carpark, CRL would apply to the entire CoW. In contrast, from 1 February 2021, CRL will only apply to the portion of the building work related to Class 7.

An exemption from the cladding rectification levy will be available in relation to certain types of social housing.

No cladding rectification levy is payable if a building is not a multiple-purpose building and that building is only NCC class 1, 9 or 10.

Building works on Commonwealth Crown land retain the current exemption from any building permit levy, including the new cladding rectification levy.

‘Regional Victoria’ is defined by reference to the First Home Owner Grant Act 2000, which lists regional municipal councils and Alpine resorts included within the definition.

Buildings with a classification of 2 to 8 under the NCC are subject to the cladding rectification levy. Broadly, these classes are:

• Class 2 – apartments
• Class 3 – hotels
• Class 4 – dwellings attached to commercial buildings
• Class 5 – offices
• Class 6 – shops
• Class 7 – car parks and warehouses
• Class 8 – laboratories and factories

If the building work involves multiple NCC class types, cost of the building work that relates to the class 1, 9 or 10 will be exempt from Cladding rectification levy.

For applicable buildings with a cost of works (single-stage project) or cost of building works (multiple stages of works) that relate to class 2 to 8 of $800,000 or more, the following rates of cladding rectification levy are payable.

The cladding rectification levy is calculated on the entire cost of works.

Certain social housing projects are exempt from the cladding rectification component of the building permit levy. This includes building permit applications that belong to any one of the following categories:

1. Social housing program delivered by the Director of Housing that will be then owned, controlled or managed by the Director; or
2. Social housing funded under an approved program that will be owned, controlled or managed by a participating agency.

A reference list of current social housing programs can be found on this website.

Further information on how to apply for a permit with this exemption can be found under the ‘Applying for a building permit number’ section on the BAMS Building Surveyor User Guide (PDF, 6423.52 KB).

Building works on Commonwealth Crown land retain the current exemption from any building permit levy, including the new cladding rectification levy.

Applications for a building permit number that are accepted by a Relevant Building Surveyor on or after the 1 January 2020.

The legislative amendments require the Minister for Planning to ensure that a review of the cladding rectification levy is undertaken no later than four years after commencement. The purpose of the review is to determine whether there is an ongoing need for that additional levy to continue funding cladding rectification works.

Amendments to the Building Act 1993 repeal section 18AA(2)(c) and insert section 205I so that an RBS will no longer be required to calculate the levy payable.

The RBS retains responsibility for estimating the cost of the building work for which an application is sought (including the cost of labour and materials). However, in relation to staged permits, the RBS must also provide an estimate of the cost of whole of building work when each BPN is applied for.

On commencement of the new provisions, responsibility for calculating the levy payable will transfer to the VBA, as will responsibility for communicating this to the applicant.

The reassessment powers previously introduced on 1 July 2019 will provide the process for the recovery of shortfall levy where final cost of works is more than the estimated cost of works.

There is no change to the RBS' duty to notify the applicant for a building permit of the estimated cost of works (section 205I of the Act).

RBS notification to the owner should take place on application for a BPN. The amount reported should match the amount entered into BAMS.

The VBA will calculate the amount of building permit levy payable in relation to the cost of each stage of building work on application for a building permit for that stage.

This means the VBA will use the RBS' estimate of the cost of works for a particular stage at the time of application for a building permit.

Amendments to the Building Act 1993 introduce a legislated refund power as part of the reassessment process (sections 205L(1A)(b) or (c), and section 205LBA). These refunds are limited to cladding rectification levy paid on staged permits where the cost of works is at least $15,625 below the estimated cost of works and either:

• the estimate under section 205I(2) or (3) of the cost of whole of building work was incorrect; or
• the VBA considers the information provided in the application for the building permit was incorrect or misleading.

This new refund power can only be exercised after a building permit is issued. In relation to the timing of reassessments resulting in a refund being payable, the VBA has discretion (under section 205L(1A) of the Act) to reassess the levy payable after the building permit for the final stage has been issued.

The VBA will continue processing administrative refund requests for building permit levy paid before a building permit has been issued. A RBS may request an administrative refund:

• after a BPN has been created in situations where a building practitioner is no longer registered, or an owner/applicant no longer wants to build or proceed with a build; or
• after being issued with a BPN, where an administrative error has occurred when entering the levy into BAMS (e.g. $100,000 instead of $10,000) and too much levy has been paid.

The VBA will not provide administrative refunds of building permit levy after a building permit has been issued.

New subdivisions 4A and 4B – inserted in Division 2 of Part 12 of the Building Act 1993 – empower the VBA to reassess building permit levy for building permits issued on or after 1 July 2019.

The VBA may reassess building permit levy after a building permit is issued and within five years of completion of work, where:

• variation to the building work has resulted in an increased cost of building work
• the estimated cost of works by the RBS was incorrect; or
• the VBA considers information provided in the application for a building permit was incorrect or misleading.

Under section 205LD of the Building Act 1993, a person who is given a notice to pay additional levy under section 205LB(1)(a) must pay to the VBA the additional amount of building permit levy and any penalty levy assigned within 14 days of the notice being given to the responsible person.

Amendments to section 205KA of the Building Act 1993 remove the requirement to report on increased final costs of building work for staged building permits. The RBS will instead be required to report any variations to the cost of works each time a BPN application is made (see changes to section 205I).

The reporting requirement in section 205KA only applies to building permits issued on or after 1 July 2019.

The reporting duty remains unchanged in relation to non-staged building permits. Owners are still responsible for informing the VBA of the revised cost of works.

Owners/applicants should complete the relevant cost of works notification form, and submit it to the VBA. (Download the form to your computer before filling it in.)

The cladding rectification levy amendments have introduced refunds as part of the reassessment power for staged permits, where the whole of cost of works is at least $15,625 more than the initial estimated cost of works.

Otherwise, there is no capacity for the VBA to reassess levy for over-estimated costs of works. However, a reimbursement of the building permit levy may be provided in circumstances where the levy was paid prior to the issue of a building permit and the application is withdrawn prior to the issue of the permit.

Note: The VBA will not reimburse building permit levy if:

• building work does not proceed
• building work is partially completed
• a building permit lapses; or
• a building permit is cancelled.

Payment is due 14 days after notice is given.

Yes – the cladding rectification levy will also be payable when the VBA exercises its powers to assess levy for unauthorised building work that would otherwise be subject to the cladding rectification levy.

The VBA's decision on the amount of cladding rectification levy refundable under the new refund power will be reviewable at VCAT.

Amendments to the Building Act 1993 include a legislated transfer of the rights of building owners who have received financial assistance from Cladding Safety Victoria to pay for cladding rectification works.

Subrogation is the process by which one party (in this case, the State of Victoria) is substituted for another, so that it may enforce the other's rights against a third party.

These amendments will allow the State Government to take legal action to recover costs of cladding rectification from building practitioners or others responsible for the installation of combustible cladding in place of owners.