The Queensland Treasurer announced on 28 March 2023 several build-to-rent (BTR) stamp duty and land tax incentives, with a proposed commencement date of 1 July 2023.
The proposed Queensland reforms follow on from other BTR incentive regimes introduced in other Australian States and Territories in reaction to growing public concerns surrounding housing affordability.
Queensland BTR tax incentives
The Treasurer’s announcement builds upon discussions held during the Queensland Housing Roundtable and Queensland Housing Summit where a key focus was addressing homelessness through the provision of increased support and supply of housing offered at affordable prices.
The three proposed Queensland BTR stamp duty and land tax concessions are:
- a reduction in land tax of up to 50 percent for up to 20 years for BTR developments which feature at least 10 percent of rental homes as affordable housing;
- a full exemption for the 2 percent foreign investor land tax surcharge for up to 20 years; and
- a full exemption from Additional Foreign Acquirer Duty (AFAD) for the future transfer of BTR sites.
BTR tax incentives in other jurisdictions
The Queensland reforms are similar, but not identical to, the BTR tax incentives currently operating in Victoria, New South Wales, South Australia and soon to be introduced in Western Australia.
The ACT has also announced its own BTR initiative in relation to the lease variation charge.
We set out below a brief comparison of the BTR tax incentives across the relevant jurisdictions.
BTR Incentives – Land Tax
In Victoria, existing land tax concessions allow for eligible BTR developments to be entitled to a 50 percent reduction on the taxable value of the land used for construction, for up to 30 years. New South Wales and South Australia have a similar 50 percent reduction in land tax but is limited to a period of 20 years (similarly to the Queensland proposal). A similar reduction will apply in Western Australia from 1 July 2023 however the details of which are yet to be finalised.
The New South Wales land tax concession sets out highly prescriptive eligibility requirements on the categories of BTR projects that can qualify, per the New South Wales Treasurer’s Guidelines.
The Guidelines do significantly narrow the categories of BTR projects that will qualify for the concessions. Unlike New South Wales, the Victorian regime has no mandated labour requirements for construction and no minimum quota for affordable / social housing. Further details on the eligibility in both South Australia and Western Australia are yet to be released.
In addition to the above, South Australia also has an affordable community housing land tax exemption, and an affordable housing land tax concession.
The Queensland proposal does not yet set out the eligibility requirements for the land tax reduction. Should the Queensland criteria reflect the requirements in place in Victoria, for example, this will compare favourably to the New South Wales provisions for property developers as it will provide greater flexibility in choosing to invest in and initiate BTR developments.
BTR Incentives – Land Tax Foreign Surcharge
The Victorian provisions provide a full exemption from the 2 percent absentee owner land tax surcharge (AOS) for the period from 2022 to 2040. New South Wales has the same full exemption from its 4 percent foreign person land tax surcharge also up to 2040. The Queensland announcement is similar in that a full exemption for the 2 percent foreign investor land tax surcharge for up to 20 years will apply.
Neither South Australia nor Western Australia impose foreign person land tax surcharge.
BTR Incentives – Stamp Duty Foreign Surcharge
In both New South Wales and Victoria, a full exemption and refund regime applies in respect of the foreign investor surcharge purchaser duty otherwise payable on the acquisition of the BTR site. In South Australia and Western Australia, there are no BTR-specific exemptions, however the general exemptions available to developers may apply.
The full exemption from AFAD in Queensland applies to the future acquisition or transfer of the identified site for development.
Next steps
The Queensland announcement comes off the back of some BTR developments that are occurring in Queensland without additional government support. However, such existing developments are not necessarily directed at affordable accommodation, which is a component of the new BTR incentives.
Queensland Treasury will consult with the property industry on the proposed BTR land tax concessions ahead of the proposed 1 July 2023 commencement date.
The Queensland Government is seeking feedback from industry during April 2023 to confirm the scope of the proposed initiatives, including key eligibility and implementation criteria.
Some of the key issues will be whether the BTR land tax concessions will be available and ready for the upcoming 2024 land tax year (which commences on 1 July 2023).
Further, as the BTR land tax reduction requires at least 10 percent of the rental homes as constituting affordable housing, the meaning of same will need to be clarified.
Will there be any ‘claw-back’ of the relief which can occur in New South Wales and Victoria, for example?
Developers will need to analyse the implications of the BTR incentives once further details are released surrounding eligibility and implementation requirements.
From a federal tax perspective, we note that income tax and GST outcomes remain a potential disincentive to investment in the BTR sector.
Please contact a member of the KPMG State Taxes Team if you would like to discuss the Queensland proposed BTR land tax and stamp duty concessions further.
