Bigger CGT discounts and MIT changes: Government details housing affordability measures for investors

15 SEP 2017 By Sasha Karen 9 min read Hotspots

First home buyers aren’t the only ones benefiting from the government’s attempts to make housing more affordable, with larger capital gains tax (CGT) discounts and changes to managed investment trusts (MITs).

Piggy bank

After previously announcing in the budget that the government would address housing affordability, a new draft legislation has been revealed detailing various concessions for private and institutional investment in affordable housing.

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The current draft legislation, if passed as is, will see investors:

  • Obtain 60 per cent CGT discounts in affordable rental housing
  • With MITs to invest in affordable housing
  • With MITs barred to acquire residential property other than affordable

CGT discount

Currently, investors who hold affordable housing as part of their portfolio are entitled to a CGT discount of 50 per cent if the property is held for at least three years. With the draft legislation, that discount will add 10 per cent, increasing to 60 per cent from 1 January 2018.

MITs

Retroactively from 1 July 2017, MITs can have affordable housing for the purpose of acquiring long-term rent, in addition to other investments, as well as be able to develop and construct affordable housing.

However, any MIT is not allowed to hold residential properties that are not considered to be affordable housing.

“This change provides legislative clarification of the long-standing convention that the primary purpose of the MIT concessional tax treatment is to apply to passive investment income,” a joint statement from Treasurer Scott Morrison and Assistant Minister to the Treasurer Michael Sukkar said.

“This change is crucial to maintaining the integrity of the tax base and will help direct foreign investment to where it’s needed most.”

Who’s determined to be eligible?

In order to qualify for the higher CGT discount, as well as the already existing concessional tax treatment available through an MIT, affordable housing tenancy needs to be managed by a registered community house provider, who will determine tenant eligibility criteria and the rent charge to keep it consistent with state and territory affordable housing policies.

A transition period is available for MITs with non-affordable housing residential properties which will occur until 1 October 2027.

Anyone is able to submit a response to the draft legislation via an email to the treasury, or by post.

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