Queensland Announces Tax Breaks to Drive Investment in Affordable Housing
INTRODUCTION
The Queensland Treasurer has announced that the state’s growing Build-to-Rent (BTR) sector will receive significant tax incentives from the Queensland Government.
From 1 July 2023, BTR developments with at least 10% of rental homes that qualify as affordable housing will receive:
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A 50% discount on land tax for up to 20 years.
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Full exemption for the 2% foreign investor land tax surcharge for up to 20 years.
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Full exemption from the Additional Foreign Acquirer Duty for the future transfer of a BTR site.
Queensland Treasury will consult with the property industry on the land tax concessions before the July 2023 commencement, to ensure they can support the delivery of more homes.
IN LINE WITH OTHER STATES
This initiative follows similar moves in the states of New South Wales and Victoria to boost the BTR sector. In July 2020, the New South Wales Government announced it would provide duty and land tax incentives for qualifying “build-to-rent projects.”
The Victoria Government followed shortly thereafter.
Both New South Wales and Victoria offer a 50% reduction on the taxable value of land used for an eligible BTR development. They also offer exemptions from surcharge purchaser duty and surcharge land. In this respect, the Queensland Government announcement is in line with the incentives currently being offered for qualifying BTR projects in those two states.
K&L GATES COMMENTS
Queensland has the opportunity to learn from the challenges and practical issues that have arisen in relation to the BTR concessions already being offered in New South Wales and Victoria.
Specifically, the other states have limited their concessions to high-rise developments that include a minimum of 50 units. This means the concessions are not available for low-rise BTR projects that involve detached or semi-detached houses. Accordingly, most qualifying projects are based in metropolitan areas only.
Further, in the other states, the 50% land value reduction does not apply until a new building has been constructed on the land. This means that land tax continues to apply based on the full value of the land during the construction phase of new BTR projects. Ideally, the concessions should apply from the beginning of the first land tax year after the property is acquired (with a clawback of those benefits if the intended BTR project does not proceed or meet the requirements).
The New South Wales and Victoria schemes also include restrictions on the strata subdivision of the high-rise developments for an extended period. While there are good reasons for this, it also means that long-term residents cannot elect to purchase their unit. This means “rent-to-own” schemes do not qualify for the concessions.
We are of the view that this is an excellent opportunity for states to consider further reforms to address the current housing targets and social and affordable housing regimes. We anticipate states may consider the introduction of height and floor space ratio bonuses for the delivery of affordable housing and BTR to address the immediate housing shortage. This will ultimately provide enhanced returns and incentives for the private and public sector to pursue such initiatives.
