Mount Alexander Shire Council rejected Lascorp Development Group's application at its meeting on Wednesday night, labelling traffic management, car park location and the site of the proposed supermarket as key issues.

The group applied to develop land for a supermarket and two shops at 2 Duke Street, 9 Urquhart Street, and 90-94 Forest Street, Castlemaine.

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The plans also included the use of land to sell packaged liquor; a reduction in car parking on site; the removal of a native tree; and an alteration to road access and associated buildings.

Lascorp has lodged a review at Victorian Civil Administrative Tribunal against "failure to determine the application within the prescribed time", meaning despite council's recommendation, they will not have the final say on the development.

Council received 178 submissions from people about the proposed project.

Councillors voted unanimously to advise VCAT it would issue a notice of decision to refuse a planning permit for the development with seven recommendations for the application to get over the line.

Councillors also unanimously supported Cr Rosie Annear's motion to add an eighth recommendation, which noted that if the Lascorp Development amended its application in response to issues raised, council would further consider the matter.

"We've had so many emails and calls from people and heard from so many different people about this issue," Cr Annear said.

"So many said they were not opposed to a new supermarket in Castlemaine, we just don't want it to be this big or in that location with the traffic implications.

"It cannot be built like that, it is unsafe and the report does not recommend it being built."

The council's recommendations to VCAT include an appropriate location for onsite detention tank and flood storage, a stormwater management plan, and to avoid the removal of native vegetation from the Urquhart Street road reserve.

There were also three recommendations linked to the proposed design affecting traffic safety in Urquhart Street.

Cr Stephen Gardner said previous studies revealed about 60 per cent of the Castlemaine community travelled to Bendigo or Maryborough for their weekly shop.

"It really makes me sad that I'm going to sit here and not approve a supermarket - this shire needs one," he said.

Council first raised the issue of loss of public space, lack of a dedicated pedestrian link through to Forest Creek Trail, removal of vegetation and access with the applicant in April 2019, shortly after it received the application.

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In response, the Lascorp Development made minor adjustments to the Urquhart Street road reserve plans; however, the access and parking layout and protection of vegetation has not significantly changed from the original concept.

Council's infrastructure unit also raised concerns with the proposed upgrade of Urquhart Street as it restricts access to Forest Street, with only a left-in turn permitted.

Cr Christine Henderson remembered previous failed applications for a Castlemaine supermarket and said it was necessary to wait until the right application came through.

"But we've got to have a decent traffic management solution and what we're offered at the moment is just rubbish," she said.

Cr Bill Maltby had a conflict of interest and did not vote.

Lascorp Development previously had an application for a smaller supermarket approved and after the site was rezoned for Commercial 1, they put in their application for a Woolworths.

There are currently two supermarkets in Castlemaine.

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