The Thin Capitalisation Bill before the Senate Economics Legislation Committee will unless amended make it “challenging to be able to deliver Build to Rent projects,” Mirvac General Manager, Build to Rent BTR (Multi-Family), Angela Buckley (pictured) said.
Under the proposed legislation, the property industry would not have access to third-party debt deductions, which is a pillar of the property trust financing structure. The feasibility of property projects relies on the involvement of third-party capital partners.
Angela told the Financial Review the proposed thin capitalisation changes would offset the incentives arising from a tax cut for managed investment trusts relating to residential BTR projects, and push investors away.
“The benefit of (the MIT reforms) would largely be eroded by the implementation of the thin cap proposed changes,” Ms Buckley told a Property Council event last Wednesday.
“Without some amendments to what’s on the table. I think it will be challenging to be able to deliver [BTR projects].”
Greystar managing director Chris Key, who appeared alongside Angela, called on the Federal Government to finalise the MIT tax reforms which have not come into effect.
He warned the BTR sector could lose momentum as the lack of progress on the MIT tax reforms – which were announced in the May Budget – meant investors were unsure what yields were available from BTR assets.
“Until you actually know the detail that underlies the MIT tax reform, you can’t actually apply a set of assumptions for a financial model against it to then see what the result is in terms of what will my return be.”
The SOURCE: If these reforms pass, they could be the death knell for Australia’s fledgling BTR sector.
