Australia’s public sector advisory body for infrastructure has urged caution and careful planning with respect to the application of value capture on significant dollar value projects which receive federal government funding.

In a new report, Infrastructure Australia (IA) said value capture can and should play a greater role in funding our nation’s public assets and urged the federal government to routinely consider ways in which the concept can be applied on projects which receive Commonwealth funding.

Nevertheless, IA notes it is important to be realistic about the role which value capture can play and cautioned that its application cannot alter the basic viability or otherwise of projects from an economic viewpoint.

According to IA, the primary benefits associated with value capture revolve around its ability to increase the available level of funding for infrastructure projects as well as to add greater fairness and equity to the split of funding between taxpayers as a whole and those who benefit directly from the project in question.

Prior to any form of the concept being considered, however, IA argues that long-term planning is needed and that it is important to think carefully about underlying needs and determine which projects best meet those requirements.

Fundamentally, IA says, no application of value capture could alter the economic benefits and costs of a given project in any way.

Around Australia, the concept of value capture has gained increasing attention over the past year as the government has sought innovative mechanisms by which to fund Australia’s public asset requirements.

In essence, the notion of value capture revolves around capturing some of the uplift in property values which occurs within localised areas where new infrastructure such as road or rail infrastructure is put in place and applying this to cover some of the capital cost of the project in question.

This can be achieved through means such as betterment charges, developer charges, leveraging government land, taxes on property transactions, and taxes on land value.

Despite acknowledging that different mechanisms might be appropriate for different projects, IA chief executive officer Phillip Davis said a broad based land tax along with the phasing out of stamp duties would offer one of the best opportunities for sustainable, long term reform.

“A broad-based land tax would involve removing many exemptions to existing taxes on land value, streamlining charging processes and phasing out other charges such as stamp duties,” Davis said.

Consult Australia chief executive office Megan Motto said value capture has proven to be successful overseas and is something which must be considered in Australia if we are indeed to finance the necessary levels of investment in infrastructure going forward.

“Value capture isn’t a one size fits all approach but must play a role in delivering the infrastructure Australia so desperately needs,” Motto said.