Property Council does not support the proposed changes to the interest deductibility rules as set out in supplementary order paper number 64 (‘SOP’) to the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill. Our position is that the Government should not progress these changes and should instead consider other mechanisms by which to reduce demand and increase supply in the housing market.
In the alternative, if the Government does choose to progress these changes, Property Council makes the following recommendations:
- The Government specifically exempt Build-to-Rent developments in perpetuity, including legitimate Build-to-Rent developments prior to 27 March 2021, and create an asset class that considers Build-to-Rent as a commercial asset rather than residential;
- Legislate a carve out for serviced apartments;
- Initial owners of new builds be given an exemption in perpetuity, and subsequent owners of new builds be given either an exemption in perpetuity or a 50 year fixed term exemption;
- Reduce the bright-line test to five years for new builds for as long as they are able to claim interest deductibility;
- All denied interest should be deductible at the time of sale where property is held on revenue account;
- Developers be exempt, and remediation be included generally under the exemption;
- Extend the application date of the new rules to 1 April 2022.