2017 Tax Planning Checklist: Affordable Housing

Affordable Housing

To encourage investment in affordable housing, the CGT discount will be increased from 50% to 60% for resident individuals who elect to invest in qualifying affordable housing.  Affordable housing refers to housing provided to low to moderate income tenants with rent charged at a discount below the private rental market rate. This incentive applies from 1 January 2018.

To obtain the additional CGT discount, the affordable housing must be managed through a registered community housing provider and the investment must be held for a minimum of 3 years.  This additional 10% CGT discount does not apply to investments held via superannuation funds or trusts (unless it is a Managed Investment Trust (MIT)as outlined below).

MITs will be able to set up to acquire, construct or redevelop property to hold as affordable housing, to attract both foreign and domestic investors.  Certain requirements apply, including the properties must be available for rent for at least 10 years and the MIT must derive at least 80% of its assessable income from affordable housing.   The remaining assessable income may be derived from other eligible investment activities permitted under existing MIT rules.

Where foreign residents invest in an MIT, the withholding rate will be capped at 15% if the foreign resident is from a country with an exchange of information arrangement with Australia.  Net capital gains arising on properties held for less than 10 years will be subject to a 30% withholding rate.