The 2017–2018 Budget contained a number of measures designed to improve Australians’ access to secure and affordable housing across the housing spectrum. These include:
- strengthening the CGT rules to reduce the risk that foreign investors avoid paying CGT in Australia;
- introducing a 50% cap on pre-approved foreign ownership in new developments;
- applying an annual charge to foreign owners who leave residential property unoccupied or not available for rent for six months or more each year;
- easing restrictions that are contributing to the supply of housing falling behind population growth and encouraging a more responsive housing market;
- improving outcomes in social housing and homelessness;
- assisting first home buyers to build a deposit inside superannuation; and
- allowing older Australians to contribute downsizing proceeds into superannuation.
Increased CGT discount for investments in affordable housing
From 1 January 2018 the CGT discount for individuals will be increased from 50% to 60% for gains relating to investments in qualifying affordable housing.
To qualify for the higher discount, housing must be provided to low to moderate income tenants, with rent charged at a discount to the private rental market rate. Tenant eligibility will be based on household income thresholds and household composition.
The affordable housing must be managed through a registered community housing provider and the investment held for a minimum period of 3 years. Any period before the time a property was purchased when it was used for affordable housing purposes will count towards the buyer’s qualifying investment period (provided the previous owner did not claim the additional discount).
The additional discount will be pro-rated for periods where the property is not used for affordable housing purposes.
The higher discount will flow through to resident individuals investing in qualifying affordable housing through a managed investment trusts.
The increased discount is not limited to investments in new affordable housing. This means that investors who elect to supply their existing properties for affordable housing will qualify for the additional discount provided the investment meets the eligibility requirements.
The Government 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.
Important: Clients should not act solely on the basis of the material contained in Update. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. This update is issued as a helpful guide to clients and for their private information.