The Property Council of Australia (PCA) have announced that the new rules clarifying the framework for institutional investment in real estate (such as allowing investment in Build-to-Rent housing), are ‘warmly welcome’, but have forewarned that tax levels for international investors in Build-to-Rent still remain a concern.
Last week the Treasury released a revised draft legislation regulating Managed Investment Trusts (MITs) which operate within stapled structures, including the eagerly-anticipated confirmation of the Government’s approach to the treatment of Build-to-Rent housing. The Property Council’s Chief Executive, Ken Morrison, praised the release of the exposure draft legislation, announcing that the package is set to bring certainty to these areas.
“This announcement brings welcomed certainty to one of the world’s most sophisticated real estate markets and makes the vital decision to allow Build-to-Rent housing,” Mr Morrison shared. According to the ATO, ‘a stapled structure is an arrangement where two or more entities that are commonly owned (at least one of which is a trust) are bound together, such that they cannot be bought or sold separately’, thus allowing these structures to be taxed appropriately.
“The transparency and professionalism of Australia’s institutional real estate sector is the envy of the world, and today’s stapled structures package will encourage this performance to continue,” declared Mr Morrison, who further explained that the PCA commends the Government for understanding that existing stapled structure arrangements are in the best interests of the 15 million Australians who invest in commercial real estate through their superannuation funds.
The exposure draft is also clear that institutional investors will be able to invest in Build-to-Rent housing through an MIT. The PCA has further stated that they believe that this is a ‘vital step’ for the creation of a new form of rental housing, and a new option for the more than six and a half million people who currently live in rental accommodation.
“We thank the Treasurer for recognising the importance of unlocking investment into this new form of rental housing for Australia and the benefits it can provide for those who rent,” said Mr Morrison.
However, concerns have been raised that in doing this, the package sets up an imbalance in the investment playing field, meaning international investment in Build-to-Rent MITs will be taxed at twice the rate of those in office buildings or shopping centres.
Currently, members of the public can respond to this ‘Exposure Draft’ and can submit responses to this consultation up until 10 August 2018.
The full document released by the Treasury, along with more information on this can be accessed here.