Imposing a 30 per cent withholding tax on international capital will result in less so-called “Build-to-rent” housing in Australia than would otherwise be the case, according to the Property Council of Australia (PCA).
In a submission to the Senate Economics Legislation Committee review of new Government legislation aimed at making sure foreign investors pay a fairer proportion of their tax, the PCA said it strongly supported the inclusion of Build-to-Rent housing within the managed investment trust (MIT) framework as a crucial precursor to the establishment of this form of rental housing in Australia.
However, it said the PCA would be arguing that imposing a 30 per cent withholding tax on international capital would result in less Build-to-Rent housing than would otherwise be the case.
The submission pointed to the potential for unintended outcomes for the student accommodation sector resulting in international capital providers being taxed at 30 per cent.
“The proposed drafting puts off-campus student accommodation at odds with other ‘commercial residential’ assets and could give rise to further unintended consequences for the tertiary education sector which relies on international capital to provide purpose-built student accommodation for higher education,” the PCA submission said.
It said the PCA strongly supported the inclusion of affordable rental housing within the MIT framework with an incentivised withholding tax rate.
“However, we believe this incentive would be more powerful if this was set below the standard 15 per cent withholding tax rate at 10 per cent – similar to that provided under the current managed investment trust legislation for clean building projects,” the submission said.