The Australian Government has announced several measures in the 2023/24 Budget to boost the country’s housing supply, with a particular focus on new build-to-rent (BTR) projects and affordable housing programs.
To encourage foreign investment in Australian BTR projects and increase the supply of rental housing, especially affordable rental housing, the Government has reduced the withholding tax from 30% to 15% on distributions from eligible residential BTR projects.
The measure will take effect from 1 July 2024 and is expected to benefit both investors and tenants. This could potentially lead to a considerable increase in foreign investment in the sector.
In addition, there is an incentive to accelerate the capital works deduction for BTR projects. The capital works deduction rate will increase from 2.5% to 4% for construction commencing after 9 May 2023. This means that (BTR) projects will provide investors with higher tax-free returns of capital at the early stages of the project as well as improving the cash flow.
To be eligible, buildings must have at least 50 apartments, minimum three-year leases, and single ownership for 10 years.