Important changes to Planning Compensation Claims (Financial Loss) under the Planning and Environment Act 1987

Joel Snyder & Matthew Susic
28 November 2025

The Planning Amendment (Better Decisions Made Faster) Bill 2025 (Bill) proposes to make significant legislative reforms to Victoria’s planning laws.  The proposed changes include amendments to claims for compensation made under the Planning and Environment Act 1987 (P&E Act) and the Land Acquisition and Compensation Act 1986 (LAC Act).  

This article explores the amendments in so far as they relate to claims for planning compensation only. 

Premise for planning compensation

Currently, an owner or occupier of land may be able to claim compensation from a planning authority for financial loss suffered as the natural, direct and reasonable consequence of land being primarily: 

• reserved for a public purpose in a planning scheme; or 
• shown as being reserved for a public purpose in a proposed amendment to a planning scheme.   

Private land is typically reserved for a public purpose via application of a Public Acquisition Overlay. 

In order to be able to claim compensation, the right to compensation must first arise.  This right often arises by:

• a responsible authority refusing to grant a permit for the use or development of land on the ground that it is or may be required for a public purpose (Permit Refusal Claim); or
• the owner of the land selling the land at a lower price than the owner might reasonably have expected to get if the land or part of the land had not been reserved or proposed to be reserved (Loss on Sale Claim).

There are other types of planning compensation which are not explored here, such as for designation of project areas.

What are the proposed amendments and will they affect my right to compensation?

Key reforms proposed by the Bill, relating to claims made under the P&E Act include:

• including a reference in section 98 (and others) that the loss must be actual financial loss;
• inserting section 99A, which appears to be substantially similar to the process already adopted albeit under different legislation;
• allowing a procedure for extensions of time for submitting a claim under section 99B;
• inserting Section 99C, which would allow the compensating authority to request more information from a claimant before being required to respond to a claim for compensation and suspending the statutory timeframe for the compensating to respond to a claim until the requested information is provided;
• limiting increased compensation for effect on residence under section 100 to the claimant’s use of the land as a principal place of residence. There is also a curious and unclear new provision which requires the amount payable to be assessed by reference to a valuation based on existing residential use;
• providing more provisions around claiming expenses under section 101;
• inserting Section 104AA, which proposes that in determining the market value the land would have had if it had not been affected, by a public purpose reservation, regard would have to be had to the provisions of the planning scheme that would have applied to that land if not for the public purpose reservation.  As part of this assessment, the Bill also proposes that regard is to be had to the actual zoning of adjoining land;
• creating specific provisions in section 104B around entitlement to interest on a disputed claim;
• providing clarity as to the timing of when an owner of land can make a Loss on Sale claim;
• confirming that only the person who was the owner of land immediately before settlement of a sale is entitled to make a Loss on Sale Claim; and
• establishing that the compensation payable, under a Permit Refusal Claim, must be assessed by reference to the use or development for which the permit was sought.

Next steps for landowners seeking compensation

Owners and occupiers of land affected by a Public Acquisition Overlay or otherwise seeking to trigger such compensation should seek legal advice on how the reforms proposed by the Bill may affect their potential claim.  

We have concerns regarding the drafting of this amending legislation and that it does not appear at the usual standard expected of legislatures. It also seems to demonstrate a lack of understanding of practice in this jurisdiction. It is therefore to be seen how these new provisions will be interpreted and applied.

Best Hooper Lawyers is a market-leading Victorian firm in planning compensation matters.  Our team has represented landowners in planning compensation matters arising from various projects, across the state, including the Outer Metropolitan Ring Road and Western Grassland Reserve.  Our team is well placed to assist you in protecting your interests and any claim for compensation.