It’s never been a better time to invest in affordable housing, now that the ATO has announced new tax incentives for investors who provide housing to people in the low- to moderate-income range.

On 9 May 2017, the Australian Government opened up new possibilities for real estate investors to save money when tax time rolls around. Starting 1 January 2018, the Government will add a 10 more percentage points to the existing discount on capital gains tax (CGT) for Australian residents who invest in affordable rental housing, bringing the total discount to 60 percent.

How Investors Can Qualify for the CGT Discount on Affordable Housing

Housing investments must qualify for the discount and provide proof to receive the drop in tax rates. Tenants must have low to moderate incomes, depending on their household consumption as well as their household size and income. and landowners must charge a discounted rate compared to the going private rental market rate. A registered community housing provider must manage the properties, and investors must hold onto their properties for at least three years before the discount applies. The discounts will go through managed investment trusts (MITs).

NRAS Investors Must Wait Until NRAS Coverage Ends to Apply

Since investors who already have invested in affordable housing with the National Rental Affordability Scheme (NRAS) already get a yearly financial incentive, the new 10 percent CGT discount will not apply to them. Those investors must wait for NRAS coverage to end before they can apply for the CGT discount.

Existing Properties to Benefit from New CGT Discount

The new discount will not only apply to new housing but also to existing properties. Investors must, of course, make their property available to low- to moderate-income households. Starting 1 January 2018, such rentals will count toward the three years’ wait investors must have before they receive the discount. Existing housing whose owners rent to eligible tenants will then receive the CGT discount beginning 1 January 2021.

The discount will also apply to properties held in existing Managed Investment Trusts, provided the investors are all residents. Foreign residents, unfortunately, will not benefit from this provision in the law; however, the Government has loosened a few other restrictions in other statutes to encourage foreign residents, too, to provide affordable housing to low- to moderate-income tenants.

With this new discount on the horizon, investors should rush to buy suitable properties now so that they can get in on the ground floor of this opportunity. Not only can it be a savvy investment for one own’s portfolio, but it can also be a worthwhile investment for the community overall. As more opportunities for decent, yet affordable housing open up, it will stabilise communities all over the nation.

Talk to your Pherrus accountant to seek advice on the CGT discount and how it may affect you and your investments.

The Insights published on our website have been written by our professional staff strictly for educational purposes. Please note that the information and views expressed above do not constitute professional advice and are general in nature only.

Other Insights from Pherrus

  • blank

    Empowering Schoolgirls to Become Champions

    Fostering Young Talent in Fiji Through the Power of Sponsorship Every day, 17 year old Vaciseva Bukanidawa travels by truck from her mother’s village of Rewasau to Wainimala Secondary School. For almost two years, she has been representing her school in the National Rugby League as a key player for the Wainimala Raiders. Breaking Down…

  • Fringe Benefits Tax on Novated Leases

    Understanding Fringe Benefits Tax and Novated Leases

    Whether you’re an employee eyeing a new car or an employer striving to boost your team’s morale, understanding novated leases as a fringe benefit and the associated tax is crucial.  Why?  Because it can lead to significant financial advantages and benefits for both employees and employers. Let’s find out more about novated leases, calculating their…

  • Fringe Benefits Tax Rate

    Fringe Benefits Tax Rate: What You Should Know

    Whether it’s a “buy nine, get the 10th coffee free” deal, happy hour, or a 12-month gym membership for the price of 11, we all love a perk!  Fringe benefits are non-cash perks employers can offer sought-after prospective employees to make an employment position more desirable. But, there’s a catch- the Fringe Benefits Tax (FBT). …