Q&A 18 September 2017

Share on facebook
Share on twitter
Share on linkedin
Share on email

Q: What has happened to the Government’s promise to provide a tax incentive for investment in affordable housing?

A: In this year’s Budget the Government announced a package of measures to increase the stock of affordable housing, including a capital gains tax incentive for investors and concessional tax treatment for managed investment trusts.

Capital gains derived from assets that are held for at least 12 months receive a 50 per cent capital gains tax discount.

Under the new law, which was introduced into Parliament last week, investors in affordable housing will be entitled to an additional CGT discount of up to 10 per cent.

The additional discount applies to investments by individuals directly in affordable housing or investments by individuals through trusts (other than pubic unit trusts and superannuation funds).

The dwellings must be used to provide affordable housing for a period or periods totaling at least three years.

For a dwelling to be classified as affordable housing it must meet the following criteria:

  • the dwelling is residential premises “that is not commercial residential premises”, such as a hotel, motel hostel or boarding house;
  • tenancy must be managed by an eligible community housing provider;
  • the community housing provider must certify that the dwelling was used to provide affordable housing; and
  • the owner must not receive a National Rental Affordability Scheme incentive.

The CGT event that would usually give rise to the discount would be disposal of the asset but sale of a part interest would also qualify.

The measure does not apply to caravans, mobile homes or houseboats.

The CGT discount takes effect from January 1, next year, so the discount is only available “to the extent that the property was used for affordable housing use on or after January 1, 2018.”

 

Share on facebook
Share on twitter
Share on linkedin
Share on email