Build-to-rent developments will be exempted from absentee owner surcharges for up to 30 years under changes unveiled by the Victorian government in an effort to bolster the burgeoning sector.
It also announced that build-to-rent projects completed and operational before 2032 would be eligible for both the absentee owner surcharge exemption and the 50 per cent land tax discount for up to 30 years.
From 2020 an absentee owner surcharge of 2 per cent was applied to Victorian land where the owner did not live there, which presented a problem for build-to-rent assets.
Treasurer Tim Pallas said the changes were made after consultation with the industry.
“This will not only ensure Victorians have access to more rental homes and a greater range of housing options—it will create thousands of jobs as we rebuild from the coronavirus pandemic,” Pallas said.
“Home has never felt as important as in the past 20 months and this initiative will ensure Victorians have access to safe and secure rental properties for a long time in the future.”
Melbourne is the build-to-rent “epicentre” of Australia with almost double Sydney’s pipeline and quadruple Brisbane’s.
But developers have argued for an extension of the 2040 deadline initially mooted for land tax discounts due to the long-term nature of these investments of about 15 years.
These changes have gone some way to appease build-to-rent developers, but the contentous windfall gains tax is going ahead, which could heavily affect the feasibility of these projects, according to Property Council of Australia Victoria executive director Danni Hunter.
Earlier this year Hunter called for changes to the windfall taxes, which are being introduced to parliament this week.
“The Property Council warmly welcomes the Victorian Government’s vote of confidence in the emerging Build to Rent sector through the confirmation of the available tax concession for BTR developments in Victoria,” Hunter said.
“Having certainty on these important concessions will mean the industry can immediately press go on around 6500 BtR apartments in central Melbourne alone, locking in Victorian jobs and increasing housing choices.
“The confirmation of the start date, the application of the concessions to BtR developments that have been completed this year and, very importantly, the extension of the concessions to 30 years, provide the BtR sector with investment confidence to get on with the job of providing high-quality housing stock for our growing population.
“The Property Council is eager to see the full detail to be contained in the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021. As the concessions are contained in the same Bill as the Windfall Gains Tax, we caution the government to not wipe out the positives of the legislation with a poorly thought-out tax on rezoning and development.”
Treasurer Tim Pallas said the adoption of the windfall gains tax would provide a “fairer tax system” that ensured even distribution of money in the community.
The windfall gains tax will slug owners of council-rezoned properties, with a 50 per cent tax on windfalls above $500,000, which the government said would be turned into funding for public transport, schools and infrastructure.
Pallas said transitional arrangements would push back the start date to July 1, 2023, and would exempt proponent-led rezonings that were already under way by May 15, 2021.
“We want to ensure Victoria has a fairer tax system, with revenue from the windfall gains tax going back into Victorian schools, hospitals and public transport,” he said.
“We’ve consulted with industry and made the changes that are appropriate and fair, and will ensure the community benefits, as well as land owners.”