Resource Management Guide No. 505
Funding Arrangements for Commonwealth Property
JULY 2014
© Commonwealth of Australia 2014
ISBN: 978-1-922096-67-8 (Online)
With the exception of the Commonwealth Coat of Arms and where otherwise noted, all material
presented in this document is provided under a Creative Commons Attribution 3.0 Australia
(http://creativecommons.org/licenses/by/3.0/au) licence.
The details of the relevant licence conditions are available on the Creative Commons website
(accessible using the links provided) as is the full legal code for the CC BY 3 AU licence.
Use of the Coat of Arms
The terms under which the Coat of Arms can be used are detailed on the following website:
www.itsanhonour.gov.au/coat-arms.
Contact us
Questions or comments about this guide should be directed to:
Public Management Reform Agenda
Department of Finance
John Gorton Building
King Edward Terrace
Parkes ACT 2600
Email: pmra@finance.gov.au
Internet: www.pmra.finance.gov.au
This guide contains material that has been prepared to assist Commonwealth entities and
companies to apply the principles and requirements of the Public Governance, Performance and
Accountability Act 2013 and associated rules, and any applicable policies. In this guide the:
mandatory principles or requirements are set out as things entities and officials ‘must’ do; and
actions, or practices, that entities and officials are expected to take into account to give effect to
those principles and/or requirements are set out as things entities and officials ‘should
consider’ doing.
Audience
This Guide applies to all Non-Corporate Commonwealth entities (Non-Corporate entities)
subject to the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and
Commonwealth Property Management Framework (Property Framework).
Key points
This Guide provides guidance on:

the process for seeking alternative funding arrangements for Commonwealth property;

categorising Commonwealth owned, non-defence property as a Special Purpose
Property (SPP); and

the new funding and management arrangements for those properties classified as SPPs.
This Guide reflects the Government’s decision to implement new arrangements for managing
and funding SPPs that came into effect on 17 April 2012.
Resources
This guide is available on the Department of Finance website at www.finance.gov.au.
Additional guidance is available from the Commonwealth Property Management Framework
webpage at http://www.finance.gov.au/property/property/property-managementframework.html or by contacting propertyframework@finance.gov.au
Alternative Funding Models for Commonwealth Property
1. Property Framework requires that Non-Corporate entities conduct transparent evaluations
of the long-term costs of investment options through the adoption of cost-benefit analysis
taking into consideration economic, environmental, and social issues in the decision making
process1. While many of these property decisions will be funded directly through budget
appropriations, entities are also encouraged to consider whether alternative funding options
would be applicable such as:
a. entering into a lease commitment with a private developer to fund construction of
office accommodation; and
b. sharing funding and project risks with the private sector by leveraging private sector
investment in infrastructure assets through its balance sheet by way of government
guarantee or equity investment.
2. The Department of Finance (Finance) can assist entities to undertake a cost-benefit analysis
of the various property investment options and to consider the applicability of the different
funding models.
1
See the Overview of the Commonwealth Property Management Guidance, available at:
http://www.finance.gov.au/property/property/overview_cpmf/overview_cpmf.html .
Resource Management Guide 505
Funding Arrangements for Commonwealth
Property | 1
Special Purpose Properties
3. Most Non-Corporate entities subject to the PGPA Act are charged commercial rents for their
office accommodation. However, some Commonwealth-owned properties are used for
special purposes and contain fit-outs and designs that result in higher operating and
maintenance costs. To charge a market-based rent to those properties does not recognise
the additional costs associated with the specialised nature of the property’s construction or
fit-out.
4. A principles-based approach has been established for classifying Commonwealth owned,
non-defence properties as SPPs in cases where the specialised nature of the property
prevents it from being managed and funded under normal commercial arrangements. The
SPP funding model is intended to facilitate improved management and sustainable funding
of SPPs within the Property Framework.
Categorising Commonwealth owned, non-defence property as a Special
Purpose Property
5. A property must meet all of the following four criteria to be classified as an SPP:
a. the Commonwealth has limited discretion over the location of the property due to
Government policy objectives; and
b. the entity has limited discretion over the type of services delivered in the property
due to Government policy objectives; and
c. the entity requires a specialised construction or fit-out to perform its functions and
is unable to perform its functions in a commercial property, nor is the entity able to
share its tenancy with other entities or the private sector; and
d. the cost of delivering services in a commercial property would be uneconomical for
the Government on a whole-of-life basis.
6. The assessment of whether a property is categorised as special purpose should be
undertaken in close consultation with Finance. This helps to ensure that properties that
meet all four of the SPP criteria are treated as SPPs consistently across the Commonwealth.
SPP properties are, by their very nature, unique and it is anticipated that few properties will
be classified as SPPs.
7. The aim of the SPP Principles is to improve the overall management of SPPs through
ensuring sustainable funding arrangements for the assets. The implementation of the SPP
Principles should seek to avoid adding unnecessary complexity to existing arrangements and
should meet the requirements of tenants and landlords in a holistic and sustainable manner.
8. Non-Corporate entities with a property that they believe meets the SPP criteria should
contact their Agency Advice Unit (AAU) in Finance’s Budget Group and provide sufficient
information to demonstrate that the property meets all of the SPP criteria. Assessments for
classifying properties as SPPs are made on a case-by-case basis by Finance in consultation
with the relevant stakeholder entity unless otherwise directed by the Government.
New funding and management arrangements for properties classified as
Special Purpose Property
9. Once a property has been classified as an SPP the next step is to establish a new funding
baseline that takes into account the whole-of-life cost to the Government of maintaining the
property. Finance has released Resource Management Guide (RMG) No. 503 Whole-of-Life
Costing for Australian Government Property Management to assist in estimating the whole-
Resource Management Guide 505
Funding Arrangements for Commonwealth
Property | 2
of-life costs. This is available at
http://www.finance.gov.au/property/property/overview_cpmf/whole_of_life_costing.html.
10. Once the whole-of-life costs have been established, these costs are then split into two
categories which together comprise the new funding baseline:
a. an office accommodation (market rent) component which is defined by the
Australian Government Property Data Collection (PRODAC) specifications for ‘Usable
Office Area’. This component is subject to a market based rent, equivalent to the
prevailing office accommodation in the location of the property, and is paid for by
the tenant entity or entities; and
b. the special purpose component (economic rent) which is defined using the
PRODAC specifications for ‘non-office area’. This component is subject to an
economic rent to be paid to Finance in its capacity representing the Commonwealth
landlord for the non-Defence, domestic property portfolio.
Office
Accommodation
(Market Rent)
Special Purpose
(Economic Rent)
This section of the property’s rent would be
determined by the market. This comprises
areas such as office areas or areas that have
a commercial comparator. The Entity is
resourced to pay for this component.
This section of the property is for all the
components where there is no market
comparator such as courtrooms and
quarantine facilities. The cost of providing
this component is appropriated to Finance.
11. The precise split of each SPP (into an office accommodation and special purpose component)
and the associated funding arrangements are to be determined on a case-by-case basis. The
funding arrangements for SPPs involve a reallocation of existing funding with any changes to
tenant entity appropriations balanced by a corresponding variation in inflows to Finance.
The SPP funding arrangements will be budget neutral.
12. For assistance in estimating the whole-of-life costs and determining the office
accommodation and special purpose areas of an SPP, agencies should contact their AAU in
Finance’s Budget Group.
Properties Currently Classified as Special Purpose Properties
13. The Government has agreed that the following properties be classified as SPPs:
a. the Commonwealth Law Court buildings in Adelaide, Brisbane, Canberra, Hobart,
Melbourne, Parramatta, Perth and Sydney;
b. the new building for the Australian Security Intelligence Organisation; and
c. the Post Entry Quarantine facility for the Department of Agriculture, Fisheries and
Forestry.
Resource Management Guide 505
Funding Arrangements for Commonwealth
Property | 3
Frequently Asked Questions
1. When should properties be assessed against the SPP Principles?
The assessment of whether a property should be categorised as special purpose should
occur before a new lease is entered into or as early as possible when a new property is
being developed by or on behalf of, an entity.
2. How do I determine which areas of an SPP should be classified as ‘Usable Office
Area’ and which are ‘Non Office Area’?
The PRODAC Specifications should be referred to when determining the ‘Usable Office
Area’ and ‘Non Office Area’. These can be found on the Finance website at
http://www.finance.gov.au/property/property/property-data-collection.html. Policy
and Advice Branch in Finance (PropertyFramework@finance.gov.au) can also provide
assistance with applying the PRODAC Specifications.
3. How do I assess whether there is limited discretion over the location of the
property?
An entity is generally deemed to have limited discretion over the location of a property
when the location of the property is set in legislation or Australian Government policy.
4. If a property is unique or unusual, is it considered an SPP?
No. A property is only considered an SPP if it meets all of the four SPP criteria in
paragraph five of this circular. Those properties that only meet one or two of the SPP
criteria are not considered SPPs for the purposes of the Government’s policy concerning
SPPs.
Resource Management Guide 505
Funding Arrangements for Commonwealth
Property | 4