What are Section 94 contributions for granny flats?

When you build a granny flat in Sydney, your local Council may charge you a fee dubbed “Section 94 Contributions”. But what exactly is the S94 levy charge?

Section 94 Contributions are Council fees required when the density of an area has increased by development; these include but are not limited to residential and commercial developments. The contributions help to cover the initial cost of services required due to the increase in density, such as expanding schools, footpaths, landscaping, parks, libraries and many other services.

Here are the four key points to understand in planning your granny flat:

1. THE LEVY

The reason you may have to pay the S94 Levy when adding a granny flat to your property is because it is considered a “new dwelling” that will bring additional people into the area. These contributions need to be paid not only when a new house or block of units is built, which will increase the number of people living in an area, but also when existing homes are expanded by renovation and the land’s floor space ratio is increased.

When you decide to build a granny flat, whether it be attached or detached from the existing dwelling or even on top of an existing dwelling (for instance building on top of a garage), you will be increasing the density of a property’s floor space ratio.

Therefore, the local council may require a contribution in the form of the Section 94 Contributions to cope with the increased density and the increase in services needed and any development works required to cater to the growing population in the area i.e. more residents and/or workers.

2. CONSTRUCTION COSTS

Councils use a tier based pricing system when it comes to the S94 Levy, so the amount you will be charged will depend on how much the construction costs. For instance, using the example of the Willoughby Council you will be charged a levy of 0.5% if the cost of your granny flat is between $100,001 and $200,000 and 1% if your development costs over $200,000.

Of course, combing through the fine print of your Council’s S94 Levy documents to find what you will be charged can be time consuming, so if you have any questions in regard to the cost of S94 Levy in the region you live in have a quick chat with a granny flat specialist.

3. EXEMPTIONS

Thankfully you may be able to avoid the cost of paying the Section 94 Contributions levy if you can find a granny flat solution that falls under your Council’s threshold. For instance, the Willoughby Council along with many other local councils won’t charge you the levy if your construction costs are less than $100,000.

4. LOCAL VARIANCE

Keep in mind the Section 94 Contributions levy will differ depending on the Council area you live in. So always check with your local Council or your granny flat builder to see if the area you live in charges a S94 Levy or whether you are exempt.

Let’s compare the Willoughby Council against the Cowra Council located in the Central West of NSW. While the Willoughby Council has a threshold of $100,000 after which you will be charged the levy, the Cowra Council has a higher threshold only charging a 1% levy on dwellings costing over $200,000.

For more information about adding a granny flat to your property, contact the team at Rescon Builders today.