Calculating the cost of building work for building permit applications

The Relevant Building Surveyor (RBS) uses this information to determine the appropriate Building Permit Levy. Costs must be precise or the applicant may have their building permit application refused by the RBS.

What is the new formula?

The new formula for the cost of the building work requires the value of chattels to be subtracted from the contract amount, which is inclusive of labour and materials. For example:

• Contract amount (including labour and materials) – Chattels = Calculated cost of the building work.

Applicants (builder or homeowner) must keep in mind that all amounts are inclusive of GST.

Are labour and materials inclusive of the builder’s margin?

All labour and material figures are inclusive of the builder’s margin (which may be referred to as builder’s markup), except for provisional sum (PSI) and/or prime cost item (PCI) allowances.

The PSI and PCI allowances must be the net cost (the raw cost), as the builder’s margin is only applicable if there is an excess on the allowances. This is only applicable on the completion of the relevant PSI/PCI.

What are chattels?

The Building and Plumbing Commission (BPC) defines a chattel to either be a ‘moveable item’ or an item that is not required for compliance with the standards, the National Construction Code (NCC) and/or relevant regulations.

These items are any item that is not fixed to the property, and if removed

• Will not damage the house and/or land;
• Will not decrease the value of the house and/or land; and
• Objectively, was not initially installed for any permanence.

Examples of chattels include:

• Free-standing white goods (not built-in)
• Free-standing drawers or closet systems
• Dining tables, chairs, beds
• Portable heating or cooling units
• Potted plants (as opposed to being planted, which are fixtures)
• Framed artwork or mirrors (will need to be hung on hooks and not screwed into the walls)
• Television and any other mounted items (the units are chattels, but the wall brackets are fixtures). 

When can the RBS refuse a building permit application?

The RBS may refuse a building permit application if the information provided is objectively incorrect or inaccurate.

Examples of incorrect information include:

• The contract price appears substantially lower than normal
• The cost of chattels is substantially higher than normal
• The contract contains false or misleading information; and
• The building permit application does not include the following information:
• The contract price or builder’s estimate (if using a cost-plus contract)
• The cost of any chattels; and
• If relevant, the information required for a staged permit.

Can a refused building permit application be challenged?

Yes. If it’s believed the RBS has incorrectly refused the building permit application, or for some other reason, the Building Act 1993 (Vic) permits the titleholder (owner) of the building or land to apply to the Building Appeals Board for an appeal.

The application for appeal will need to be filed and submitted to the Board within 30 days after the applicant of the building permit application was notified of the refusal.

The owner can nominate a representative to act on their behalf. This can either be the builder – if it was the builder who initially sought for the building permit on the owner’s behalf – or, the owner may engage their own construction lawyer for further assistance. The owner will need to fill out and sign an Authority to Act form and submit it to the Board along with their appeals application. 

To find out more, contact HIA's Contracts and Compliance team

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The above is intended to provide general information in summary form. The content does not constitute specific advice and should not be relied upon as such. Formal advice should be sought by members and customers with respect to particular matters before taking action.