The government’s measures that address the issue of housing affordability includes a boost to tax incentives for investors in “affordable housing”, which it has also defined in its budget document. The proposal gives an added CGT discount for investment in affordable housing.
From 1 January 2018, the government will provide an additional 10% CGT discount to resident individuals investing in qualifying affordable housing. This means investors in qualifying affordable housing will be entitled to a 60% discount on capital gains tax.
To qualify for the additional discount, housing must be provided at below market rent and made available for eligible tenants on low to moderate incomes. Tenant eligibility will be based on household income thresholds and household composition.
The affordable housing must also be managed through a registered community housing provider and the investment held as affordable housing for a minimum period of three years.
The additional discount will be pro-rated for periods where the property is not used for affordable housing purposes.
Impact Resident individuals investing in qualifying affordable housing will be eligible to receive the additional CGT discount. Non-residents will continue to be ineligible.
The additional discount will also flow through to resident individuals investing in qualifying affordable housing through Managed Investment Trusts (MITs) where the property has been held for a minimum of three years.
Consistent with current rules, non-residents investing in eligible affordable housing through an MIT will not receive the additional CGT discount. However, they will generally be subject to a 15% final withholding tax rate on capital gains after a qualifying investment period of 10 years.
Definition of “affordable housing” A property will qualify as “affordable” housing if rent is charged at below market rate and it is made available for eligible tenants on low to moderate incomes. The government says tenant eligibility will be based on household income thresholds and household composition.
The government says it will consult further on the implementation of this policy, including on the precise definition of affordable housing and tenant eligibility, and what qualifies as rent charged below the market rate.
Prior use will qualify, to an extent Any period prior to purchase where the property has been used for affordable housing purposes will count towards the buyer’s qualifying investment period, if the previous owner has not claimed the additional discount, and the property is used for affordable housing for an aggregate period of at least three years from 1 January 2018.
To qualify for the 60% CGT discount, an investment property must be supplied for affordable housing for a period in aggregate of at least three years from 1 January 2018. The additional discount will be pro-rated for periods where the property is not used for affordable housing purposes.
Requiring a minimum holding period is intended to encourage longer term investment in the supply of affordable housing, which the government’s says supports its aim of providing affordable housing for low income Australians.
Not just for new housing The additional 10% CGT discount will apply to investments in both new and existing affordable housing.
This means that investors who elect to supply their existing properties for affordable housing will qualify for the additional 10% discount from 1 January 2018, provided the investment meets the eligibility requirements. Importantly to note however is that superannuation funds will not be eligible.
@ [#Budget2017], [CGT discount], [housing]
📷
Comments