The Housing Industry Association (HIA) and the Property Council of Australia both appeared before the Senate Economics Legislation Committee, urging senators to rewrite parts of the federal government’s tax reform bill before it passes.
The legislation covers a proposed minimum tax on discretionary trusts, alongside the second tranche of changes to capital gains tax (CGT) and negative gearing settings – including a new definition of what counts as a residential dwelling for those tax purposes.
HIA Managing Director Jocelyn Martin said around three in five residential building businesses operate through trust structures.
“They are practical longstanding business structures used by thousands of family-owned builders, tradies and construction businesses to manage cash flow, invest in their business and planned for succession,” Jocelyn said.
“If these reforms go ahead businesses will be forced to spend thousands of dollars on advice and restructuring simply to understand and comply with these changes.”
Jocelyn said the trust tax changes were drawing most of the attention, but a separate provision in the same bill had been largely overlooked.
“Everyone is talking about the tax on trusts, but almost no attention is being paid to the equally concerning housing measures buried within this legislation.
“The government says it wants more housing supply, yet the proposed definition is too narrow and too subjective and will exclude a broad range of housing supply options.”
According to Jocelyn, granny flats, multi-generational housing, substantial renovations and knock-down rebuilds would all be excluded from the proposed dwelling definition, despite adding to housing capacity.
HIA wants the definition redrafted in consultation with industry and aligned with existing definitions already used in the GST system.
The association is also calling on the Senate to reverse the ban on self-managed super funds investing in new rental housing, which HIA says has already contributed to a drop in new home sales.
“Australia cannot tax, regulate and redefine its way to more homes,” Jocelyn said.
“We need policies that encourage investment, support small businesses and make it easier to build, whereas this Bill would result in the opposite effect.”
The Property Council raised similar concerns about the trust tax but focused its submission on the detail of the CGT and negative gearing changes.
The organisation is calling for the purchaser eligibility period for new homes to be extended from 24 to 36 months, starting from a dwelling’s first genuine residential occupation, and wants the rules to accommodate staged developments and purchases made before occupation.
The Property Council also wants all build-to-rent developments to qualify for the negative gearing activity exemption, regardless of whether they participate in the Commonwealth’s optional build-to-rent tax incentive, and wants investors’ access to capital losses preserved under the new CGT framework.
The group welcomed some amendments already reflected in the bill, including a negative gearing exemption for retirement villages and clarifications for land lease communities, but said further changes were needed.
Both the Property Council and HIA are opposed to the minimum tax on discretionary trusts proceeding in its current form, and the Property Council has called for both reform packages to be subject to an independent statutory review after two years of operation, with findings tabled in Parliament.