Tax incentives for build-to-rent developments
On 28 April 2023, the Australian Government announced it would provide incentives to increase the supply of housing by:
- Reducing the withholding tax rate for eligible fund payments from managed investment trusts (MIT) attributable to residential build-to-rent projects from 30% to 15%. This measure will apply from 1 July 2024 for income attributable to newly built build-to-rent projects.
- Increasing the capital works tax deduction depreciation rate for eligible new build-to-rent projects from 2.5% to 4% per year. This measure will apply to projects where construction commences after the Budget (9 May 2023) and will shorten the period that construction costs of eligible buildings are depreciated from 40 to 25 years.
These incentives only apply to build-to-rent projects comprising 50 or more apartments or dwellings made available for rent to the general public. The dwellings must be retained under single ownership for at least ten years. In addition, landlords must offer a lease term of at least three years for each dwelling.
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