Property consultancy Cushman & Wakefield has released insights from its ‘APAC Living Policy Radar’, highlighting that Australian Build to Rent has seen recent supportive policy movement at both federal and state government level.

Cushman and Wakefield believe that alongside removing uncertainty, the improved policy picture makes Australia a more competitive Build to Rent investment destination internationally in terms of tax treatment.

The direction of travel indicated in the National Housing Accord looks positive for
Build to Rent. The Accord explicitly recognises the requirement to attract more institutional capital into housing, if its 1.2m home target is to be hit.

Build to Rent has been recognised in the report as a key mechanism for this and its high density and fast absorption profile make it an effective tool for boosting supply and bringing wider place making benefits.

However, there is still plenty of scope for policy levers to smooth the path for more Build to Rent activity. Wider recognition of Build to Rent as a distinct use class, with consistency across states, stands out as an enabling step.

Federal policy moves

The National Housing Accord is an overarching policy that is underpinning the acceleration of housing delivery across Australia and has led to many of the supportive policies outlined. Build to Rent is a direct and indirect beneficiary of the Accord.

The 1.2 m home delivery target by the end of FY2029 is cascading pressure down from the top of central government to increase housing delivery. States are reviewing their planning policies in response.

Moreover, the range of fiscal stimulus measures focused on enabling new housing development mean that the New Homes Bonus incentive will financially reward states for exceeding delivery targets.

Managed Investment Trust (MIT) withholding tax rate on eligible Build to Rent related fund payments to foreign investors reduced from 30 % to 15%.

Eligible sources for the payments are Build to Rent rental income and capital gains, including where a ‘membership interest’ relatable to Build to Rent is disposed of and realises a capital gain.

The reduction in the withholding tax rate includes MIT’s that already own a Build to Rent development, regardless of when it was built. Capital works deduction rate has been increased from 2.5% 4% for the sector.

This essentially relates to capital expenditure during construction but in some circumstances can apply to extensions or alterations to an existing building, if not tenanted.

Alongside this, Foreign Investment Review Board (FIRB) application fees for land acquisitions intended for Build to Rent on ‘residential land’ have been reduced from residential fee tiers to commercial.

This represents a substantial reduction as residential fee tiers are much higher. This guidance does not currently extend to purpose-built student accommodation (PBSA) or retirement living – although that does not mean they are always ineligible.

Finally, Build to Rent operators can now access additional tax concessions if 10% or more of the units in a scheme are delivered as affordable.