NEW guidelines have been introduced for development in potable water catchment areas.

State Government Water Minister Peter Walsh said the new "more practical approach'' would allow land owners to build on properties within potable water catchment  areas when there was certainty that water quality would be protected.

The announcement comes after landholders throughout the state have called for the "planning mess" to be resolved.

This week The Weekly Times reported that an announcement to resolve the issue, plaguing hundreds of landowners, was imminent.

"These new development guidelines are good news for landowners, regional communities and local councils because it provides clarity and flexibility in the development of catchment areas,'' Mr Walsh said.

He said that under the previous guidelines introduced by the former Government in 2009, many landowners have been unable to develop their land if it was within an open potable water catchment area, even though the developments did not threaten water quality.

"The 2009 guidelines were too restrictive and left many regional communities with large areas of land that couldn't  have houses built on them,'' he said.

"This was understandably frustrating for individual landowners as well.''

The guidelines would now allow water storage managers and council planners to assess the acceptable level of  development, based on local conditions, he said.

The new guidelines allow for developments within catchments where councils ensure the domestic wastewater is treated and retained on site, and the proposal presents a low risk to water quality.

The new guidelines were developed by a Victorian Water Industry Association working group, which included Water Corporations, the Department of Sustainability and Environment. the EPA and the  Department of Health.

Mr Walsh also announced funding for a domestic wastewater management pilot project for the Mansfield Shire Council.