From then to now
The recent tax reforms and this year's Budget announcements (with consultation on implementation to come), demonstrate how far BTR sector has advanced. It is an opportune time to recognise where we have come from, assess the progress that's been made and to look ahead to where the sector may go.
Land tax
Previously, there was an unequal playing field where state revenue offices could collect little or no land tax from build-to-sell (BTS) projects, since the individual apartments owned by individual landlords may fall below the land tax threshold. By contrast, BTR towers, with a single landlord, are well above the land tax threshold (and likely to be at the highest rate, particularly if foreign owner surcharges apply).
NSW, Victoria and Qld have all legislated for a 50% land tax discount for eligible BTR assets.
MIT withholding tax rate
Returns were taxed at 30%, instead of the concessional rate of 15% for returns from commercial, retail and industrial real estate.
Concessional rate of 15% has been granted for returns for eligible BTR assets.
GST
GST embedded in acquisition and development costs is not creditable for BTR but is creditable for BTS.
No change, and likely to remain this way for the foreseeable future.
Depreciation
Rate for capital works tax deduction was 2.5%.
Rate for capital works tax deduction is now 4%.