Guaranteeing the essentials
Protecting and boosting the essential services Australians rely on
Boosting investment in affordable housing
Creating the right incentives for private investment in affordable housing
Tax incentives to boost investment in affordable housing
The Government is taking action to encourage investment in new and existing affordable rental housing by increasing the capital gains tax (CGT) discount from 50 per cent to 60 per cent for qualifying affordable housing. To qualify for the higher discount, housing must be provided to tenants on low to moderate incomes, with rent charged at a discount below the private rental market rate. The affordable housing must be managed through a registered community housing provider and the investment held for a minimum period of three years.
From 1 January 2018, the capital gains tax discount will increase from 50 per cent to 60 per cent for qualifying affordable housing.
From 1 July 2017, the Government will allow Managed Investment Trusts (MITs) to be established for the purpose of developing or acquiring affordable housing to hold for rent.
This reform will provide foreign and domestic investors, including superannuation funds, with a new way of accessing long-term, stable investments in the property sector and provide a way to direct investment to build more affordable housing.
Foreign investors who invest in affordable housing will be subject to a withholding tax rate of 15 per cent on their investment returns if they are from countries that have an exchange of information arrangement with Australia.
The MITs must earn at least 80 per cent of their assessable income from affordable housing. If properties are held for rent for less than 10 years, the proceeds of any capital gains received by foreign investors will be taxed at double the rate.
Domestic individual investors will benefit from the pass through of the new 60 per cent CGT discount for affordable housing where properties have been held for a minimum of three years.
- Factsheet: Housing Affordability - Boosting affordable housing for Australians through investment tax incentives
Encouraging institutional investment in affordable housing
A new National Housing Finance and Investment Corporation will be established by 1 July 2018 to operate an affordable housing bond aggregator to provide long term, low-cost finance for affordable housing providers.
The structure of the bond aggregator is currently being examined by the Affordable Housing Implementation Taskforce.
The Government will work with State and Territory governments to strengthen the national regulatory framework for community housing providers in order to provide institutional investors with confidence to invest in the sector and reduce red tape for community housing providers that operate in multiple states.
These measures build on the Government’s 2016-17 Budget commitment to enable direct deduction of welfare payments and Commonwealth Rent Assistance from tenants, now agreed with the majority of State and Territory governments, to public and community housing associations.
The Government is also providing $6 million to The Big Issue’s ‘Homes for Homes’ initiative which encourages homeowners and developers to donate 0.1 per cent of a property’s sale price to fund new affordable housing.