Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Bill 2018

The Property Council strongly supports the Government’s commitment to tackling housing affordability through the use of incentives to drive new supply and encourage private investment through targeted tax measures.

The Property Council supports the use of an additional affordable housing capital gains tax (CGT) discount of up to 10 percent to act as an incentive for individual investors to increase the supply of affordable housing.

However, we believe that this incentive – in isolation – will be ineffective in encouraging institutional scale investment in the supply of affordable housing for members of the community earning low to moderate incomes. 

Government incentives to attract institutional scale investment into the affordable rental housing sector are much more likely to be successful if there is a robust Build-to-Rent sector that delivers long term rental housing.

The following recommendations provide a broader package of financial incentives that, when coupled with an approach that allows institutional investors to treat residential real estate investment in the same way it views other commercial real estate opportunities, would be better able to encourage investment in affordable rental housing. Specifically:

  1. Continue to allow MITs to hold residential premises if they are held for the primary purpose of deriving rent in accordance with Division 6C’s eligible investment business test.
  2. Ensure Build-to-Rent property held within a MIT is subject to the same withholding tax rates as other forms of institutional real estate investment (ie. 15% for eligible jurisdictions).
  3. Provide a stronger incentive for investment in affordable rental housing by applying a 10% withholding tax rate to affordable housing components of any Build-to-Rent developments held within a MIT– similar to that provided under the current MIT legislation for clean building MITs.
  4. Provide an additional 10% capital gains tax discount to the components of any Build-to-Rent development that have been used to provide affordable housing for at least 3 years (1095 days) as per the proposed legislation currently before Parliament.

Download the submission below.