The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 was introduced on 5 June 2024.
The Bill contains the proposed measures to provide a 15% concessional MIT withholding rate for certain eligible build-to-rent developments along with an accelerated capital allowance deduction of 4% per year (normally 2.5%). The Government announced the policy in the 2023-24 Federal Budget and had released exposure draft legislation in April. Please refer to our previous article on the exposure draft here.
Following consultation, the Bill as introduced contains some important improvements from the exposure draft, including:
- Ability to access the 15% withholding rate on capital gains relating to eligible BTR developments and also membership interests in entities that hold BTR developments.
- Clearer and easier to satisfy requirements relating to the nature of the affordable dwellings in comparison to the non-affordable dwellings
- 10% of the overall number of dwellings must be affordable; and
- There must be at least the same number of non-affordable dwellings as affordable dwellings of a particular size.
This means that an entity can have a single class of affordable dwellings and as long as it also has the same number of non-affordable dwellings of that size, there can also be other classes of non-affordable dwellings.
The Commissioner also has the discretion to determine compliance with the eligibility criteria where minor breaches occur that are outside the control of the entity.
- The continuation of the concessional rate to rent and capital gains beyond the 15 year compliance period, provided the dwellings are still being operated in a way that would qualify as an eligible BTR development.
Although the Bill includes many improvements raised through the consultation process, it also includes an integrity type rule that will deny the benefits where payments are directed through certain chains or trusts which will in practice make applying these rules difficult.
The Bill retains the BTR misuse tax which will claw back the
benefits of the reduced withholding and accelerated capital
allowances deduction if the property ceases to be eligible during
the 15-year compliance period. The Bill also retains numerous
notification/compliance obligations on owners that must be
carefully managed to ensure compliance.
In our view, whilst the improvements in the Bill are welcome, the
rules still may not go far enough to generate sufficient additional
investment to achieve the stated purpose of increasing housing
supply.
Originally published 11 June 2024
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