Appendix 9: Proposed Interim Community Benefits Formulae

1. The Community Benefits (CB) Formulae in Schedule 7 of a Land Use Activity Agreement (LUAA) determine the payment for certain land use activities impacting on Traditional Owner rights. The CB Formulae have an economic and cultural loss component.
2. Since 2018 Traditional Owner groups have advocated for more substantial changes to the CB Formulae in line with the Timber Creek judgments. In 2019 Cabinet noted that reaching a resolution of the CB Formulae in light of the Timber Creek judgment was a priority for the First Principles Review (the Review).
3. While the Review has not reached a final position with regards to the CB Formulae, it is anticipated in its final report to recommend that the formulae set out below replace those in Schedule 7 of the LUAA on an interim basis, until a final position can be reached.
4. The Review’s final report is anticipated to recommend a process to reach a final position that includes:
   1. Traditional Owner and State representatives jointly commissioning an expert or experts into providing options for how to arrive at cultural loss payments using formulae
   2. The commission will deliver an Expert Report which will be the subject of further development and negotiation of final formulae by State and Traditional Owner representatives
   3. A proposal or options on final formulae will be presented to Cabinet for adoption as the final formulae.
   4. Once final formulae are adopted by Cabinet, any further payment owing for activities undertaken in the interim period would be made to the relevant Traditional Owner corporations.
5. The structure of Formula C below (relating to VicForests’ timber harvesting) is no longer fit for purpose due to changed circumstances and requires re-design. For that reason, an interim position is not achievable. Compensation for VicForests’ timber harvesting activities will be the subject of recommendations in the Review report.
6. The table below is proposed as the replacement Schedule 7 in LUAAs.

Formula A

• Formula A applies to Commercial Leases for more than 10 and up to and including 21 years; Major Public Works (where a Lease, Licence or Permit applies); Commercial Licences and Commercial Permits for more than 10 years; Agriculture Leases covering 40 hectares or more (including leases for plantations and aquaculture), and Community Purpose Leases for more than 21 years.
• Community Benefits (CB) payment = a flat rate of 60% of Rental Received (RR)*, but will be no less than $200 per annum.
  The State retains the remaining 40% of RR, pending outcome of the Expert Report and final Community Benefits formulae.
  On the Adjustment Date, the State will retrospectively apply the final Community Benefits formulae to any activity undertaken since the Variation Date, adjust the rental payment for future years and pay any rental owed for the interim period.
  GST will be added to all payments.
  The Corporation will be entitled to reimbursement of reasonable negotiation costs, as prescribed by regulation, and provided for under s 52 of the Act.
  *Public Works (where a Lease applies) and Commercial Leases will be at market value as determined by the issuing authority, based on the market valuation as specified in Valuer-General’s valuation report. For Community Purpose Leases discounted below the market value, the Community Benefits will be based on the discounted rate actually paid. A discount may be applied on account of the community purpose of the Lease at the discretion of the issuing authority. Rental is determined by the issuing authority, and under certain circumstances (e.g. times of hardship due to drought etc), the issuing authority may reduce or exempt the rental payable in any particular year. That is, the Community Benefits will be based on the actual rental payments received by the issuing authority in each year.

Formula B

• Formula B applies to Major Public Works where a Lease, Licence or Permit does not apply.
• CB payment = 60% percent of UMV*, but will be no less than $1300
  On the Adjustment Date, the State will retrospectively apply the final +
  Community Benefits formulae to any activity undertaken since the Variation Date and make any further payment owed for the interim period.
  GST will be added to all payments.
  The Corporation will be entitled to reimbursement of reasonable negotiation costs, as prescribed by regulation, and provided for under s 52 of the Act.
  *UMV means Unimproved Market Value, which is the market value less the value of physical or structural improvements as specified in Valuer-General’s valuation report (or otherwise agreed by both parties).

Formula C

• Formula C not used.

Formula D

• Formula D applies to the sale of Crown land.
  CB payment = 60% percent of UNMV but will be no less than $1300.
  The State retains the remaining 40% of UNMV, pending outcome of the Expert Report and final Community Benefits formulae.
  On the Adjustment Date, the State will retrospectively apply the final Community Benefits formulae to any activity undertaken since the Variation Date, and make any further payment owed for the interim period.
  GST will be added to all payments.
  The Corporation will be entitled to reimbursement of reasonable negotiation costs, as prescribed by regulation, and provided for under s 52 of the Act.
  UNMV means Unimproved Net Market Value, being the Sale price, less financial value of third part interest(s)* less the Market value of Improvements**
  *Value, most likely expressed as a percentage of market value, of third party interests as specified in Valuer-General’s valuation report (or as otherwise agreed by both parties). Examples of third parties that might have an interest in Crown land include local councils, non-state tenants, and community or not-for-profit organisations.
  **Value, expressed in dollar terms, of physical or structural improvements, i.e. buildings, as specified in Valuer-General’s valuation report (or as otherwise agreed by both parties).

Formula E

• Formula E applies to Commercial Leases of more than 21 years.
• CB payment = a flat rate of 60% of Rental Received(RR)*, but will be no less than $200 per annum.
  The State retains the remaining 40% of RR, pending outcome of the Expert Report and final Community Benefits formulae.
  On the Adjustment Date, the State will retrospectively apply the final Community Benefits formulae to any activity undertaken since the Variation Date, adjust the rental payment for future years and pay any rental owed for the interim period.
  GST will be added to all payments.
  The Corporation will be entitled to reimbursement of reasonable negotiation costs, as prescribed by regulation, and provided for under s 52 of the Act.
  *Rental received: for Commercial Leases this will be at market value as determined by the issuing authority, based on the market valuation as specified in Valuer-General’s valuation report. Under certain circumstances (e.g. times of hardship due to drought etc), the issuing authority may reduce or exempt the rental payable in any particular year. That is, the Community Benefits will be based on the actual rental payments received by the issuing authority in each year.

Formula F

• Formula F applies to Major Works and/or clearing of land for Commercial Purposes (where a Public Land Authorisation is not required, and excluding Major Public Works).
• CB payment = 60% percent of UMV* but will be no less than $1300
  On the Adjustment Date, the State will retrospectively apply the final Community Benefits formulae to any activity undertaken since the Variation Date, and make any further payment owed for the interim period.
  GST will be added to all payments.
  The Corporation will be entitled to reimbursement of reasonable negotiation costs, as prescribed by regulation, and provided for under s 52 of the Act.
  *UMV means market value less the value of physical or structural improvements, i.e. buildings, as specified in Valuer-General’s valuation report (or as otherwise agreed by both parties).