Build-to-Rent Tax Concessions in QLD: Boosting Affordable Housing

TAXATION AND REVENUE

minutes reading time

DATE PUBLISHED: April 18, 2023

key takeaways

  • Proposed Concessions: The Queensland Government has proposed tax concessions for Build-to-Rent developments, including a 50% discount on land tax, full exemption of foreign investor land tax surcharge, and exemption on additional foreign acquirer duty (AFAD) for eligible projects.
  • Eligibility Criteria: The tax concessions apply to Build-to-Rent developments with at least a 10% affordable housing component.
  • Feedback and Implementation: Queensland Treasury is currently seeking feedback from industry stakeholders on key eligibility and implementation criteria, with the intention to introduce the proposed measures on 1 July 2023.

On 28 March 2023, the Queensland Government proposed certain taxation concessions to assist with tackling housing supply and affordable housing issues in Queensland.

The measures specifically apply to the Build-to-Rent sector, which is currently in a major growth phase in Queensland with the intention that these concessions will promote the inclusion of affordable housing within such projects to alleviate housing supply issues.

Background

In October 2022, the Queensland Government’s Housing Summit identified a range of possible opportunities to be explored, including potential action to explore changes to regulatory settings to facilitate and incentivise housing supply, and consider the merit of land tax concessions in the context of certain build-to-rent developments.

Building on the success of Queensland’s Build to Rent Pilot program, the Queensland Government has introduced the following proposed tax concessions to support the outcomes from the Housing Summit that were to be explored.

What Are The Proposed Concessions?

The proposed taxation measures provide the following concessions to eligible Build-to-Rent developments:

  • 50% discount of the total land tax payable on the development site up to a maximum term of 20 years;
  • full exemption of any foreign investor land tax surcharge payable on the development site up to a maximum term of 20 years, where the development is owned and operated by a foreign entity; and
  • A full exemption on any additional foreign acquirer duty (AFAD) charged on future acquisitions or transfers of the site in question.                

Who does it apply to?

The proposed taxation concessions are stated to apply to Build-to-Rent developments with a minimum affordable housing component of at least 10%.

A key goal of the measures is to support affordable developments, or affordable parts of developments, that would not be commercial unless such the benefit of such concessions were utilised.

what happens next?

Queensland Treasury is responsible for implementing the Build-to-Rent developments’ policies.

Queensland Treasury is currently seeking feedback from industry and interested parties, to confirm the scope of the proposal including key eligibility and implementation criteria.

It is understood that specific feedback is being sought on the following issues:

  • In order for a development to be eligible for a concession, what proportion of the development devoted to affordable dwellings could be supported, and how should those dwellings be defined in the context of this initiative.
  • What eligibility and operational requirements should be developed to demonstrate eligibility for the concession, including tenancy management and rent policies, while balancing compliance and administration.
  • How should a Build to Rent development be defined, noting the intention of the proposal is to deliver additional affordable residential housing.

At this stage it is understood that the intention is to introduce the proposed measures from 1 July 2023.

conclusion

 The Queensland Government has proposed tax concessions for Build-to-Rent projects to address housing supply and affordability issues. These concessions, targeting developments with a minimum of 10% affordable housing, include land tax discounts and exemptions for foreign investors.

Queensland Treasury is seeking industry feedback before introducing the measures on 1 July 2023, aiming to further incentivise affordable housing development in the state.

GET IN TOUCH WITH US!

If you would like to discuss these proposed measures or the implications of the measures for your existing or proposed project(s), please contact the MCW team for a discussion.

In addition, noting that a particular tax concession should never be the driver of a commercial decision, we are also able to assist with the following other issues that are often key considerations in a Build-to-Rent project context:

  • Financial modelling and legal/commercial considerations and analysis of the land tax and AFAD concessions/savings against the financial implications of the provision of affordable housing.

  • Foreign Investment Review Board (FIRB) issues and associated costs.

  • Optimal GST outcomes:

    • Build-to-Rent projects normally provide a less favourable outcome than developers of Build-to-Sell projects as they would be entitled to claim construction and development related input tax credits.
    • We advise on the commercially feasibility of designing a Build-to-Rent projects (e.g. designing the physical and the operating characteristics of the premises, etc) in such a manner that enables the claiming of such input tax credits on Build-to-Rent projects. This could have a significant positive impact on profitability.

  • Income tax considerations.

  • Non-tax considerations (e.g. legal, property, commercial, etc).

With a market-leading property law and taxation law practice in our Brisbane and national offices, Team MCW would welcome an opportunity to assist you on this tax planning opportunity, or any aspects of your property development.

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