The Government has released draft tax legislation to implement elements of its housing affordability plan. The following measures are contained in the draft legislation:

  • enabling investors to obtain a 60% CGT discount in relation to affordable rental housing if they hold the investment for at least three years. Individual investors may invest by holding an ownership interest in affordable housing directly or through certain trusts, such as holding units within a managed investment trust (an MIT);
  • allowing MITs to hold affordable housing (residential premises) primarily for the purpose of deriving long-term rent. Those MITs will also be permitted to derive other eligible investment business income from investments, including shares or commercial property. MITs will be able to construct or develop the affordable housing property within the MIT;
  • precluding MITs from acquiring residential property other than affordable housing. MITs currently holding residential property will be allowed a transitional period, until 1 October 2027, for their existing property assets.

To qualify for the higher CGT discount and MIT concessional tax treatment, an affordable housing tenancy will need to be managed by a registered Community Housing Provider and provided as affordable housing for at least three years. As part of this, housing providers will determine the tenant eligibility criteria, including the rent charged, consistent with state and territory affordable housing policies.