NSW biodiversity stewardship agreements: credits, title and long-term obligations

A biodiversity stewardship agreement (BSA) commits land to long-term conservation management under an agreement with the NSW Minister. It is registered on title and ordinarily binds later owners. The agreement may create saleable biodiversity credits, but the obligations attached to the land can continue in perpetuity.

For a landholder, the decision brings together land use, ecology, cashflow and tax. Credit demand and price are not guaranteed.

Feasibility depends on the land, ecology and market

Section 5.7 of the Biodiversity Conservation Act 2016 (NSW) (BC Act) permits a stewardship site to comprise whole or part parcels and, where ownership is common, separate parcels. Legal eligibility does not establish commercial feasibility.

Before commissioning the full application, test:

• the ecological values likely to generate ecosystem or species credits, existing conservation obligations, prior funding and whether the proposed management produces the improvement required by the biodiversity assessment method (BAM);
• current and prospective demand for the likely credit classes;
• access, fencing, weeds, pests, fire and other management costs, together with the opportunity cost of restricting future land use;
• title interests, leases, finance, mining or petroleum interests and access arrangements; and
• the likely Total Fund Deposit (TFD) and transaction costs, and the tax position, on which separate tax advice is needed.

The NSW Government BSA application guide and current templates should be used from the feasibility stage and carried through to lodgement.

The accredited assessment defines the credits and obligations

An owner applies under section 5.8. The application must include a biodiversity stewardship site assessment report (BSSAR) prepared by an accredited person.

Under section 6.11, the BSSAR:

• assesses the proposed site’s biodiversity values under the BAM;
• sets out the proposed management actions; and
• identifies the number and class of credits that may be created.

The BSSAR and management plan templates are mandatory in the current administrative process. The management plan and TFD model should be prepared together: a management action that creates credits also creates a cost, evidence and delivery obligation.

Title and third-party interests can determine feasibility

Section 5.5 provides for the Minister to enter an agreement with all owners of the land. Section 5.9 adds further requirements. A tenant or lessee, a mortgagee or chargee, and the holder of a mining lease, mineral claim or petroleum production lease must consent in writing. The person with the benefit of a covenant, and the holder of any other mining or petroleum authority, must be consulted. Separate rules apply to Crown land and to land owned by a Local Aboriginal Land Council.

The application should be supported by a title and interests schedule. It should identify every registered and beneficial owner; mortgages, charges, caveats, leases and licences; easements, covenants and access needed for management; any subdivision or sale proposal; mining, petroleum and infrastructure interests; and the consents and priority arrangements needed to register and operate the BSA.

The current application resource page includes mortgagee and caveator consent material. Resolve these interests before substantial assessment expenditure if they could prevent registration or performance.

Agreement effect, registration and successors

A BSA takes effect on the day or event stated in it and, under section 5.10, continues in perpetuity unless terminated through one of the statutory routes.

The agreement’s legal effect and title registration are related but distinct:

• Section 5.12 requires the Registrar-General to record an entered, varied or terminated agreement on the relevant title or register.
• Once registered and in force, section 5.13 binds successors in title, including a successor to only part of the land.

A later purchaser does not take an unencumbered conservation asset. It takes the land subject to the registered BSA and the associated management obligations. Sale documents should deal expressly with management records, accrued or anticipated payments, access, compliance, insurance, unsold credits and cooperation with any required re-issue or variation.

Creation, registration, transfer and retirement are different events

These terms should not be used interchangeably:

1. Creation: under section 6.17, credits are legally created by and in accordance with the BSA when it first takes effect, at a later time specified by it, or when a credit-increasing amendment takes effect.
2. Registration of creation: the Environment Agency Head must then register the creation and record the landowner as holder as soon as practicable. Under section 6.17(2), the credit has effect even before it is registered.
3. Transfer: a holder may agree to transfer a credit under section 6.19, but section 6.20 provides that the transfer does not take effect until registered.
4. Retirement: under section 6.27(1), a holder “may apply in writing” to retire a credit that is in force. Retirement is not automatic: the Environment Agency Head may refuse on the grounds in section 6.27(4), and retires an accepted credit by recording its retirement in the register of biodiversity credits under section 6.27(5).

Credits are separate transferable statutory rights. A transfer of the underlying land does not, without the necessary credit transaction and registration steps, answer who holds unsold credits.

The Total Fund Deposit and first-transfer cashflow

Under section 6.21(7), the TFD is the present value of all scheduled management payments for the site over the life of the agreement, calculated using the discount rate that the Environment Agency Head determines and publishes from time to time. It is intended to fund the ongoing management actions, not to state the market value of the credits. The current TFD guidance and calculator use a 3.2% discount rate for agreements entered from 15 August 2022. The rate is reviewable, so check the current guidance before relying on it.

Section 6.21 controls the cashflow on first transfer:

If all credits are first transferred, the full TFD is payable to the Biodiversity Stewardship Payments Fund before registration. For a partial first transfer, section 6.21(3) provides:

“If an application for registration of a first transfer is made in respect of a number of biodiversity credits that is less than the number of biodiversity credits created in respect of the biodiversity stewardship site, the amount payable into the Fund before that transfer is registered is (subject to this section) the relevant proportion of the total Fund deposit for the biodiversity stewardship site, or the proceeds of sale of the biodiversity credits, whichever amount is the greater.”

Section 6.21(3A) states:

“If the Environment Agency Head considers an amount that would be payable under subsection (3) is not appropriate—

(a) the Environment Agency Head may determine another amount as being the amount payable, and

(b) the amount determined under paragraph (a) is the amount payable under subsection (3).”

Section 6.21(4) then supplies the whole-site cap:

“Despite anything to the contrary in this Part, the payment of an amount into the Fund in respect of a first transfer of biodiversity credits is not to result in the total amount paid into the Fund in respect of all the biodiversity credits created in respect of the biodiversity stewardship site exceeding the total Fund deposit for the site.”

This can require a landholder to fund a shortfall. If the relevant TFD proportion is $400,000 but the first parcel of credits sells for $300,000, the ordinary amount payable to the Fund is $400,000. If that parcel instead sells for $500,000, the ordinary amount is $500,000: all sale proceeds go into the Fund, rather than $400,000 going to the Fund and $100,000 being retained by the seller. Both examples remain subject to the section 6.21(3A) discretion and the whole-site cap in section 6.21(4).

Section 6.21(5) creates the same funding issue if the site owner proposes to retire a credit without a first transfer: “the amount that would have been payable under this section if the biodiversity credit had instead been transferred is to be paid into the Fund before the credit is retired.” Model each sale parcel, retirement, goods and services tax (GST) treatment, TFD payment, fees and settlement timing before entering a binding credit transaction.

The first-transfer payment can sometimes wait. Under clause 6.12 of the Biodiversity Conservation Regulation 2017 (NSW) (BC Regulation), it may be deferred until the credit’s second transfer in two cases: where the first transfer is part of distributing a deceased holder’s estate and not a sale, or where the holder sells all of the credits, and all of the land for which they were created, to the same person and that person agrees to the deferral.

Market, pricing and transaction risk

Much of the demand comes from proponents whose approvals require credits to be retired; our note on when the Biodiversity Offsets Scheme applies explains how those obligations arise. Credit price is negotiated. The NSW Government pricing guide identifies establishment costs, opportunity cost, the TFD and transaction expenses as relevant inputs.

A proponent can generally pay into the Biodiversity Conservation Fund instead of retiring credits (section 6.30), in an amount set from 1 October 2026 under the Biodiversity Offsets Payment Calculator Order 2026 (NSW). That amount is one reference point a buyer may use in negotiating price.

A commercial model should stress-test:

• no buyer, delayed buyer and partial sale scenarios, including a sale price below the corresponding TFD requirement;
• changes in credit class, matching rules or demand;
• assessor, survey, legal, valuation, finance and broker costs, as well as annual land-management performance and recordkeeping; and
• the value of the restricted land and the enforcement, rectification and credit-cancellation consequences of non-compliance.

Do not treat an indicative market enquiry as a binding offtake.

Tax and valuation advice comes before commitment

Entering a BSA, receiving management payments and selling or retiring credits can each have tax consequences. Stone & Pillar Legal does not provide tax advice. Before committing, obtain advice from a registered tax agent or other qualified tax adviser on the agreement and on any credit transaction. The Australian Taxation Office has published class rulings on some stewardship arrangements, including CR 2026/15 and CR 2026/16. Both are dated 22 April 2026, and each applies to entities that enter into the arrangement it describes from 1 July 2025 to 30 June 2030. Whether either applies is a question for that adviser.

Independent valuation advice should address both the credits and the restricted land.

Variation, termination and sale of the land

Section 5.11 governs variation. A change to site area, owners, credits, management actions or payment arrangements may require a formal variation, a further assessment, survey work, consents and fees.

Termination is deliberately constrained. Under section 5.10, consensual termination ordinarily requires the owner to take the measures the Minister requires to offset the negative biodiversity impact. The exception is voluntary termination. It is available only if the owner asks within 3 months after the agreement is entered into, or after 5 years, and, at the time of termination (not merely when the request is made), no credits have been created or, if credits have been created, none has been retired and all are cancelled with the holder’s consent. In that case the Minister must consent to the termination. A proposed sale is not itself a termination ground.

Before a land sale, reconcile four records:

1. the registered title and BSA boundary;
2. the operative agreement and management plan;
3. the register of biodiversity credits, including every credit’s holder and status; and
4. the TFD account, management-payment history and outstanding obligations.

If the land and all of the credits created for it will pass to the same buyer, check whether the first-transfer payment can be deferred under clause 6.12 of the BC Regulation, as explained above.

Statutory fees sit outside assessment and transaction costs

The NSW Government’s 2026–27 scheme-fee schedule lists the following fees. The BC Regulation sets them in fee units (clauses 5.2, 6.26 and 6.27), and a fee unit is $132 in 2026–27.

Transaction	2026–27 fee
BSA application	$3,300
Termination request	$3,300
Variation to create additional credits	$8,580
Variation to include additional owners	$13,860
Other BSA variation (other than a minor variation)	$1,980
Credit transfer	$1,980
Credit retirement	$1,980
Annual administration contribution for site owners	$1,980

The fee unit is indexed to the Sydney consumer price index for each financial year starting on 1 July (clause 1.5), so the dollar amounts are recalculated each year. The annual contribution is charged per site, and co-owners are jointly liable for it. The Environment Agency Head may refund or waive all or part of a fee payable to the Environment Agency Head under the BC Act (section 14.6(2)). Fees are only part of total establishment and transaction cost.

Operative reforms and the 2026 draft regulation

The Biodiversity Conservation Amendment (Biodiversity Offsets Scheme) Act 2024 (NSW) commenced on 7 March 2025, apart from its genuine-measures provisions, which had not commenced as at 30 September 2026. The NSW Government reform update summarises the changes.

The draft Biodiversity Conservation Amendment (Biodiversity Offsets Scheme) Regulation 2026 had not been made as at 30 September 2026. As exhibited, it would, among other things:

• remove the credit transfer fee and replace the flat retirement fee with a fee of 0.24 fee units for each credit retired (about $32 a credit at the 2026–27 fee unit), payable on no more than 10,000 credits for a project where credits are retired to meet an approval obligation;
• require a person who negotiates a BSA for a landowner, or who advises on or helps with buying or selling credits, to be accredited as a conservation broker, although an accredited assessor could still negotiate a BSA for a landowner;
• replace the individual site accounts in the Biodiversity Stewardship Payments Fund with a common account, with a time-limited election for owners of existing sites to keep an individual account; and
• replace the two fixed deferral cases in clause 6.12 with a power for the Environment Agency Head to approve deferral of the first-transfer payment where requiring it would be unreasonable, deferral would not adversely affect the biodiversity values the agreement protects and the transferee agrees.

Those proposals belong in sensitivity analysis, not the current legal calculation.

The ecological assessment, title position, funding model, tax treatment and sale documentation should be resolved before a landholder commits. Signing the agreement before valuing the credits and the restricted land leaves the perpetual obligation to be priced too late. Our page on biodiversity and land clearing and our project approvals and licensing practice explain the matters on which we act.