iscover HIA lobbies for accelerated depreciation to boost housing supply
TaxAllowing investors to depreciate new construction in a compressed period would help ensure more homes are built sooner, the building association has said.
The Housing Industry Association (HIA) has told a Senate committee that reducing the capital gains tax (CGT) discount would risk reducing supply and that the government should instead focus on other policy options.
HIA managing director Jocelyn Martin said if the government wants to encourage investors to build new housing, it should be looking at constructive levers such as accelerating depreciation schedules.
"Currently, investors can depreciate new construction over decades. If the policy goal is to increase new supply, then accelerate depreciation, compress it from forty years to five," Martin told the Select Committee on the Operation of the Capital Gains Tax Discount this week.
Martin said this would not reduce lifetime revenue to government and would bring revenue forward as more homes would be built sooner.
Encouraging investors to build more homes through incentives such as accelerated depreciation would also have benefits for tax revenue across GST, payroll tax, stamp duties, income tax from workers and company tax from suppliers, she said.
"If the government were to build 1.2 million homes, they would raise an additional $50 billion in tax revenues, enabling them to invest in infrastructure to build even more homes, solving the affordability problem and investors would leave the housing market," said Martin.
The government previously introduced new tax incentives relating to depreciation in 2024 to help increase build-to-rent developments.
The incentives increase the capital works deduction depreciation rate to 4 per cent per year and reduce the final withholding tax rate on eligible fund payments from eligible managed investment trust investments from 30 per cent to 15 per cent.
In its submission, the Housing Industry Association said addressing the challenge of housing affordability would require increasing investment in housing from owner-occupiers, investors and government.
"This can only be achieved through lowering the cost of delivering and financing completed homes," the submission said.
"Improving housing affordability requires policies that support a sustained expansion in housing supply. This includes efficient planning systems, timely land release, coordinated infrastructure provision and stable taxation and financing settings that encourage long-term investment."
Tax settings affecting housing investment, it said, should be stable, predictable and neutral across asset classes to support long-term investment.
"Australia’s capacity to increase the supply of new housing is highly sensitive to investor incentives," it said.
"Investors currently commence construction on more than 40 per cent of new homes built in Australia, underscoring their central role in financing and delivering new housing supply. Policies that reduce investor participation therefore have direct and immediate consequences for construction activity."
Miranda Brownlee
Miranda Brownlee is the editor of Accountants Daily and Accounting Times, the leading sources of news, insight, and educational content for professionals in the accounting sector.
Miranda has over a decade of experience reporting on the financial services and accounting sectors, working on a range of publications including SMSF Adviser, Investor Daily and ifa.
