Build-to-rent – Managed Investment Trust withholding tax rate for residential developments

Announcement date
5 June 2024 

Link to announcement 
Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 

Problem being addressed
Australia is facing a shortage of housing relative to demand, especially in desirable locations, which is weighing on housing affordability and contributing to rental stress. This proposal addresses one particular facet of this problem: the lack of institutional investment in the Australian Build to Rent (BTR) sector and the need to attract foreign institutional investors who are familiar with BTR as an asset class. Once established as an asset class this well help to build scale and liquidity in the sector and thus attract domestic investors. However, foreign investors are not currently investing in BTR due the current tax settings being uncompetitive relative to other property investments in Australia and the treatment of BTR investments in other jurisdictions.

A deterioration of housing affordability also increases demand for non-market housing, such as affordable and social housing. Within the overall housing market, there is a particular lack of affordable, safe, secure and well-located housing for many Australians on low and more moderate incomes.

Proposal
This policy would support an increase in residential housing supply, with an emphasis on rental stock and affordable housing, in good locations by providing tax concessions to attract more foreign institutional investment to the Australian BTR sector. It will include maximum income or asset conditions for BTR operators to select who is eligible to apply for discounted dwellings. This option will ensure high income households are excluded from accessing the affordable dwellings.  

This proposal will therefore more directly and with greater certainty assist key workers to find affordable dwellings in well-located areas, to the benefit of the broader community.

Assessed Impact Analysis outcome
Adequate

Assessed Impact Analysis outcome
The IA addresses the seven IA questions and follows an appropriate policy development process commensurate with the significance of the problem and magnitude of the proposed intervention. 

Regulatory burden
The Treasury failed to provide a regulatory cost estimate.