Build-to-rent tax concessions

In the 2023–24 Budget the government announced that it would encourage investment and construction in the build‑to‑rent (BTR) sector.

For eligible new BTR projects where construction commences after 7:30 pm AEST on 9 May 2023 the government will:

• increase the rate for the capital works tax deduction from 2.5 per cent to 4 per cent per year
• reduce the final withholding tax rate on eligible fund payments from managed investment trust investments from 30 per cent to 15 per cent.

The government also committed to consulting on implementation details, including:

1. whether a minimum proportion of dwellings should be offered as affordable tenancies
2. the length of time dwellings must be retained under single ownership before being able to be sold (the announcement indicated a 10‑year period).

Views sought

Following initial consultations with industry, Treasury is currently seeking views from interested parties on the draft legislation and explanatory materials for these changes as well as on the specific implementation details identified by the government. A policy fact sheet is available to assist you in the consultation phase.

Affordable tenancies

The exposure draft legislation requires a minimum proportion of dwellings to be made available as affordable tenancies. Views are sought on the impacts of including this requirement.

• States and territories offering BTR concessions take different approaches with respect to whether a proportion of dwellings must also be offered on an affordable basis. Separately, planning and zoning requirements provide those jurisdictions with some ability to impose requirements with respect to affordable dwelling availability.
• Definitions of what may constitute an affordable tenancy differ across jurisdictions and work is underway to consider a consistent approach to affordable housing.

Single ownership retention

The exposure draft legislation includes a minimum period of 15 years during which dwellings must be retained under single ownership. Views are sought on whether this period strikes the right balance between investment needs and meeting public demand for long term tenancy availability, together with any analysis of the impacts of reducing or extending this period.

It is noted that some states and territories apply a 15‑year period in relation to certain BTR concessions.