Land banking tax measures not likely to affect major residential property developers

Land banking tax measures not likely to affect major residential property developers
Land banking tax measures not likely to affect major residential property developers

Residential property developers are expected to escape a new tax measure which prohibits deductions for expenses associated with holding vacant land.

The measure was included in the "tax integrity" initiatives in Tuesday's budget, as the federal government turned its attention to land-banking in the housing affordability consideration.

The move to abolish expenses raised concerns in the development industry that its costs for holding land could rise as a result.

However, Property Council of Australia chief executive Ken Morrison told Fairfax Media on Wednesday he had clarified the situation with the Treasurer's office.

"So long as there is an operating business being undertaken on the land then this measure won't apply," Mr Morrison said.
 

According to Treasury, the initiative will raise $50 million in revenue for the government over the forward four years estimates period.

"This is an integrity measure to address concerns that deductions are being improperly claimed for expenses, such as interest costs, related to holding vacant land, where the land is not genuinely held for the purpose of earning assessable income," it said in the budget papers.

"It will also reduce tax incentives for land banking, which deny the use of land for housing or other development."

The measure is set to take effect from July 1 next year.

Treasury said the new measure will apply to land held for residential or commercial purposes.

"However, the 'carrying on a business' test will generally exclude land held for commercial development," it said.

Further detail will emerge in legislation at the aim of targeting of individuals who had chosen to hold land and claimed expenses for a development that didn't eventuate.
 
Before the PCA's clarification was obtained, Frasers Property Australia chief executive Rod Fehring suggested the new tax measure that prohibits deductions for expenses associated with holding vacant land, "reflects a lack of understanding" from the federal government.

"From our point or view, we can't ignore it, we have to be exempted from it, or we will have to change our business model, which is to find ways not to own land and develop it … that's the capital-efficient thing to do," Mr Fehring told Fairfax Media during Frasers Property first-half results presentation in Singapore.

"It is not viable for development purposes. I don't see how adding another tax to land and housing products, that land is raw material for, will make housing more affordable."

"We pay land tax, we pay development contributions, we pay state infrastructure contributions, we pay stamp duty, we pay foreign purchasers surcharge, we pay rates, need I go on?" Mr Fehring said.

"I am not enthusiastic, it is highly counter-productive … supply will be further constrained."

Tags: 
Land Banking Vacant Tax

Comments

Be the first one to comment on this article
What would you like to say about this project?