How do the new NSW council de-amalgamation laws work?

Introduction

Mechanisms for those NSW councils amalgamated in 2016 to ‘de-amalgamate’ are now in the Local Government Act 1993 (LG Act) and the Local Government (General) Regulation 2021 (LG Regulation), with the commencement on 21 May 2025 of the Local Government Amendment (De-amalgamations) Act 2024 and the Local Government (General) Amendment (De-amalgamations) Regulation 2025.

But de-amalgamation is as tricky to do as it is to say. In short, de-amalgamation is a three-step process in which:

1. the amalgamated council proposes de-amalgamation through a business case;
2. if the business case is approved, the amalgamated council holds a referendum; and
3. if the referendum is successful, the Minister for Local Government may proclaim the amalgamated council demerged.

Business cases

Under the newly introduced section 218CD of the LG Act, an amalgamated council may submit a business case to the Minister setting out a proposal for de-amalgamation. The council must publicly exhibit the business case and consider any submissions made by the public in response.

The business case must include certain details set out in Part 2 of Schedule 10 of the LG Act and section 396A of the LG Regulation, such as:

• the area and governance of the new proposed council(s);
• the estimated cost of de-amalgamation and how this will be paid for, including by amending the rates and charges currently levied; and
• any interruptions that the council’s current services might experience.

After consulting the Boundaries Commission and the Electoral Commissioner, the Minister may approve the council holding a referendum.

Referenda

Part 3 of Schedule 10 of the LG Act sets out the procedural requirements for a referendum. De-amalgamation referenda follow the general rules for elections, but the question must be as follows:

Should the [name of the amalgamated area] be de-amalgamated and the [names of the former areas] be re-constituted as separate local government areas? Yes/No

If the referendum is supported by a simple majority (that is, greater than 50% of enrolled electors within the amalgamated council’s area), it is successful.

The Minister may grant a council up to $5 million to offset the cost of de-amalgamation, or lend a council any amount so long as it is subject to interest rates set by the New South Wales Treasury Corporation.

Proclamations

If the referendum is successful the Minister may, entirely at their discretion, make a recommendation to the Governor for a proclamation giving effect to the de-amalgamation proposal. In our opinion it would be a brave Minister indeed who refused to make such a recommendation in the face of a clearly positive referendum result.

The new councils must call elections as soon as practicable and, in any case, no later than 12 months after the proclamation.

Key takeaways

We recommend that councils interested in de-amalgamation ensure that their business case is:

• exhibited widely;
• amended to take account of the community’s feedback; and
• robust and comprehensive before submission to the Minister.

This will give the council its greatest chance at securing approval for holding a referendum.