Australia’s Senate Economics Legislation Committee has released its report on the Treasury Laws Amendment (Build to Rent) Bill 2024 and the Capital Works (Build to Rent Misuse Tax) Bill 2024. These draft bills propose tax incentives to stimulate investment and construction within the build-to-rent (BTR) sector.

On 27 June 2024, the Senate agreed to refer the Treasury Laws Amendment (Build to Rent) Bill 2024 (the BTR bill) and the provisions of the Capital Works (Build to Rent Misuse Tax) Bill 2024 (the imposition bill) to the committee for inquiry and report by 4 September 2024.

The BTR bill would amend the Income Tax Assessment Act 1936, Income Tax Assessment Act 1997, and Taxation Administration Act 1953 to provide incentives for investors to support the construction of new build-to-rent (BTR) developments by increasing the capital work deduction rate to 4% per year and reducing the final withholding tax rate on eligible fund payments from eligible managed investment trust investments (MIT) to 15%.

The imposition bill is an integrity measure of the BTR scheme designed to ensure that BTR developments are available for rent throughout the 15-year compliance period. It imposes a misuse tax of 1.5% that allows for recovery of tax concessions claimed by entities where a BTR development fails to meet eligibility requirements by ceasing to be an active BTR development during the 15-year compliance period.

The Committee also believes that the BTR bill’s increased capital work deductions rate of 4% per year for eligible new BTR development will incentivise domestic investors.