Increased CGT discount for affordable housing with a sting-in-the-tail

On 14 September 2017, the Government released for public consultation exposure draft legislation to implement the announcement in the 2017 Budget that from 1 January 2018 the CGT discount for eligible resident investors in qualifying affordable housing to 60% (from 50%). The change is part of the government’s policy to encourage increased investment in affordable rental housing.

To qualify, the property must be an eligible dwelling managed through a registered community housing provider for use as affordable housing for at least three years. The increased CGT discount for affordable housing is available to individuals investing directly, or indirectly through:

  • trusts (other than superannuation funds or certain public unit trusts);
  • managed investment trusts (MITs); and
  • partnerships.

Subject to a transitional rule, the exposure draft will also amend the income tax law such that MITs cannot own investments in residential property, except where the property is affordable housing or commercial residential premises. The change will prevent MITs from investing in houses, units, and apartments to hold for rent (other than affordable housing). A 10-year transitional rule will apply to existing residential property assets held by MITs.

The transitional rule will apply to MITs that have invested in residential premises (that are not commercial residential premises) prior to the announcement of the change. If the transitional rule applies, the MIT will need to either only use that dwelling for affordable housing or dispose of that dwelling by 1 October 2027 if it wants to continue to be a MIT.

Consultation closes on 28 September 2017.

For further information or advice, please contact:

Neil Brydges
Special Counsel
T: 03 9611 0176


Millie Mavrodis
T: 03 9611 0130