Extra homes could be built through tax rate cut

Tess Ikonomou | April 28, 2023

Australia’s peak property body says the federal government’s plan to halve the tax rate for build-to-rent housing could create an extra 150,000 dwellings.

Prime Minister Anthony Albanese announced a suite of housing measures on Friday, following a meeting of national cabinet in Brisbane.

The federal government will offer incentives to increase the supply of housing by increasing the depreciation rate from 2.5 per cent to four per cent per year for eligible new build-to-rent projects where construction commences after May 9.

It will also reduce the withholding tax rate for eligible fund payments from managed investment trusts to foreign residents on income from newly constructed residential build-to-rent properties after July 1, next year, from 30 to 15 per cent.

A report commissioned by the Property Council of Australia showed levelling the withholding tax rate could create an extra 150,000 homes over the next decade.

Property Council chief executive Mike Zorbas said the announcement was a “strong step” toward reversing Australia’s growing housing shortage.

“More supply means downward pressure on the cost of renting and buying homes and will offer more housing choices and affordable options at a time when we desperately need them,” he said.

Mr Albanese said the nation’s planning ministers will develop proposed reforms to increase housing supply within six months as part of a national plan to manage growth in cities and towns.

Later this year, housing ministers will come up with a plan to strengthen renters’ rights nation-wide.

Housing Minister Julie Collins said she looked forward to meeting with her state and territory counterparts next week to discuss renters’ reforms.

“The national cabinet agreement is a significant step forward in making sure renters have certainty about their tenancy, so they can create a home,” she said.

Master Builders Australia chief executive Denita Wawn said industry will work with national cabinet, and urged the opposition and cross bench to allow the passing through parliament of the government’s signature $10 billion Housing Australia Future Fund.

“More needs to be done to speed up the delivery of new housing in the medium and high-density part of the market over the short term,” she said.

“Government efforts to expand the stock of build-to-rent will provide welcome support.”

Greens housing spokesman Max Chandler-Mather said the nation was “one step” closer to a national freeze on rent increases after lobbying by his party.

“The Greens won’t stop until the national cabinet signs off on a concrete plan to stop rent increases and give renters real relief,” he said.

The government will also provide an extra $2 billion for more social and affordable rental housing in next month’s budget, increasing the National Housing Finance and Investment Corporation’s liability cap from $5.5 billion to $7.5 billion from July 1. 

Ms Collins said it would support the government’s plan to build tens of thousands of additional social and affordable rental homes.