|
|||
|
|||
|
|
| 2007-08 |
2008-09 |
2009-2010 |
2010-2011 |
2011-12 |
|---|---|---|---|---|
| – |
$23.5m |
$72.2m |
$170.1m |
$356.8m |
The Government also states that compliance costs for entities participating in the NRAS may vary depending on the type of entity and that these costs are likely to be low.[8] However, an estimate of these costs would be necessary to inform prospective NRAS participants, who would weigh such costs against any proposed incentives when deciding whether to participate in the NRAS.
As noted, there are three types of tax incentive:
Schedule 1 of the Bill amends the ITAA.
Item 1 inserts the definition of the ‘National Rental Affordability Scheme’ into existing section 11-55 of the ITAA.
Item 6 of the Bill proposes amendments to the ITAA in relation to capital gains tax exemptions.
Item 7 of the Bill proposes to insert a new Division 380—National Rental Affordability Scheme into the ITAA, which deals with tax offsets (new Subdivision 380-A), as well as the non-assessability of State and Territory payments (new Subdivision 380-B).
Taxation law provides capital gains tax concessions for housing in two ways:
With respect to capital gains tax and the NRAS, the Explanatory Memorandum to the Bill states:
A capital gain or capital loss may arise from a CGT event happening to an entitlement to receive incentives from the Australian Government, or from state or territory governments, in relation to the NRAS. The application of CGT to these entitlements is inappropriate as it would reduce or remove the benefit that the incentives are intended to provide.[9]
Item 6 proposes to amend subsection 118-37(1) of the ITAA, to include NRAS receipts in the list of receipts that are exempted from capital gains tax. These NRAS receipts are:
A tax offset reduces the amount of tax that a person or body would have to pay in a financial year.
Item 5 proposes to insert a new subsection 67-25(2B) into the ITAA, to the effect that tax offsets under proposed new Division 380 would be subject to refundable tax offset rules. This would make the NRAS tax offset a refundable tax offset.
In item 7, proposed new subdivision 380-A would provide for six categories of bodies that could claim a tax offset:
Not-for-profit entities do not ordinarily pay tax and so are not eligible to receive incentives in the form of refundable tax offsets. The Government states that not-for-profit entities may instead receive incentives in the form of an amount payable for an NRAS year.[12]
The provisions are largely mechanical and, as they are described adequately in the Explanatory Memorandum,[13] this Digest does not describe those provisions.
The provisions in proposed new subdivision 380-A are based on several principles, which may be summarised as follows:
Item 7 also proposes to insert new Subdivision 380-B—Payments made in relation to the National Rental Affordability Scheme etc., into the ITAA. New Subdivision 380-B would contain new section 380-35, which proposes that a payment or non-cash (in-kind) benefit provided by a State or Territory, would be neither assessable nor exempt income.
Taken together, the Bill’s provisions contain substantial tax incentives to increase the supply of rental housing.
However, the effect of these incentives would be mitigated by the fact that investors would have to accept below-market rents as a condition of participating in the NRAS. Compliance costs would also be a factor for consideration by investors.
Potential investors would have to weigh such factors when deciding whether
to invest under the NRAS.
[1]. Explanatory Memorandum, National Rental Affordability Scheme (Consequential Amendments) Bill 2008, p. 3. As to the Government’s explanation of the retrospective effect of the Bill, see Explanatory Memorandum, National Rental Affordability Scheme Bill 2008, p. 4.
[2]. ‘Market rate’ or ‘market value rent’ is not defined in either the National Rental Affordability Scheme Bill 2008 or in the National Rental Affordability Scheme (Consequential Amendments) Bill 2008. The Government has left the formula for determining market value rent to be prescribed in future regulations: see Explanatory Memorandum, National Rental Affordability Scheme Bill 2008, p. 5.
[3]. Explanatory Memorandum, National Rental Affordability Scheme (Consequential Amendments) Bill 2008, p. 5. Note that the proposed definition of ‘incentive period’ is ‘a 10 year period that starts on or after 1 July 2008’: National Rental Affordability Scheme Bill 2008 proposed section 4.
[4]. Targeted investors include financial institutions, banks, property trusts, superannuation funds, developers and not-for-profit organisations: see Explanatory Memorandum, National Rental Affordability Scheme Bill 2008, p. 4.
[5]. The Hon. Tanya Plibersek, Minister for Housing and Minister for the Status of Women, ‘Second reading: National Rental Affordability Scheme Bill 2008’, House of Representatives, Debates, 24 September 2008, p. 7.
[6]. R. Webb and P Hicks, ‘National Rental Affordability Scheme Bill 2008’, Bills Digest, no. 49, 2008–09, Parliamentary Library, Canberra, 2008-09.
[7]. Explanatory Memorandum, National Rental Affordability Scheme (Consequential Amendments) Bill 2008, pp. 3–4.
[8]. ibid., p. 4.
[9]. ibid., p. 20 at paragraph 1.44.
[10]. For the definition of ‘incentive’, see proposed section 4 in the National Rental Affordability Scheme Bill 2008.
[11]. As provided for in proposed section 8 of the National Rental Affordability Scheme Bill 2008.
[12]. See Explanatory Memorandum, National Rental Affordability Scheme Bill 2008, p. 7; Explanatory Memorandum, National Rental Affordability Scheme (Consequential Amendments) Bill 2008, pp. 3 and 6.
[13]. ibid., pp. 7–19.
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