Allens and Urbis continue their ongoing advocacy to ensure the Build to Rent sector realises its full potential to create more liveable cities, drive economic growth and play a key role in alleviating the ongoing housing crisis. Their recent report highlights the progress made so far.
Tax reforms and this year’s Budget announcements (with consultation on implementation to come), demonstrate how far the Build to Rent sector has come.
Land tax
Previously, there was an unequal playing field where state revenue offices could collect little or no land tax from Build to Sell projects, since the individual apartments owned by individual landlords may fall below the land tax threshold.
By contrast, Build to Rent towers, with a single landlord, are well above the land tax threshold (and likely to be at the highest rate, particularly if foreign owner surcharges apply).
Currently, NSW, Victoria and Qld have all legislated for a 50% land tax discount for eligible Build to Rent assets.
MIT withholding tax rate
Returns were taxed at 30%, instead of the concessional rate of 15% for returns from commercial, retail, and industrial real estate.
Now, a concessional rate of 15% has been granted for returns for eligible Build to Rent assets.
GST
GST embedded in acquisition and development costs is not creditable for Build to Rent but is creditable for Build to Sell.
There is no current change or insight regarding GST, and it is likely to remain this way for the foreseeable future.
Depreciation
Rate for capital works tax deduction was 2.5%.
The report shows that now, the rate for capital works tax deduction is 4%.
