Federal Register of Legislation - Australian Government

Primary content

A Bill for an Act to amend the law relating to taxation and foreign acquisitions and takeovers, and for related purposes
Administered by: Treasury
For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.
Registered 23 Oct 2019
Introduced HR 23 Oct 2019
Table of contents.

2019

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Treasury Laws Amendment (Reducing Pressure on Housing Affordability MEASURES) Bill 2019

Foreign acquisitions and takEovers fees imposition amendment (near‑new dwelling interests) bill 2019

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

(Circulated by authority of the Minister for Housing and

Assistant Treasurer, the Hon Michael Sukkar MP)

 

 


Table of contents

Glossary............................................................................................................. 5

General outline and financial impact........................................................... 7

Chapter 1........... Capital gains tax changes for foreign residents......... 11

Chapter 2........... Additional capital gains discount for affordable housing   35

Chapter 3........... Near-new dwelling interests........................................... 57

Chapter 4........... Statement of Compatibility with Human Rights.......... 63

 

 


The following abbreviations and acronyms are used throughout this Explanatory Memorandum.

Abbreviation

Definition

ACT

Australian Capital Territory

AMIT

attribution managed investment trust

CGT

capital gains tax

Commissioner

Commissioner of Taxation

GST

goods and services tax

GST Act

A New Tax System (Goods and Services Tax) Act 1999

ITAA 1936

Income Tax Assessment Act 1936

ITAA 1997

Income Tax Assessment Act 1997

MIT

managed investment trust

NRAS

National Rental Affordability Scheme

Primary Bill

Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019

TAA 1953

Taxation Administration Act 1953

TARP

taxable Australian real property


Capital gains tax changes for foreign residents

Schedule 1 to the Primary Bill amends the ITAA 1997 to:

       remove the entitlement to the CGT main residence exemption for foreign residents other than where certain life events occur during the period that a person is a foreign resident where that period is six years or less; and

       modify the foreign resident CGT regime to clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from TARP, the principal asset test is applied on an associate inclusive basis.

Date of effectThese measures apply from 7.30pm by legal time in the ACT on 9 May 2017.

Proposal announcedThese amendments implement two of the measures announced by the Treasurer in the 2017-18 Budget as part of ‘Reducing pressure on housing affordability – capital gains tax changes for foreign investors’ and forms part of a package of measures concerning housing affordability.

Financial impactThese measures, together with the associated measure relating to foreign resident capital gains withholding payments that was announced as part of the 2017-18 Budget but enacted separately in the Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017, have these revenue implications:

2016-17

2017-18

2018-19

2019-20

2020-21

*

$150m

$100m

$105m

$155m

* Unquantifiable

Note that the revenue gain over the forward estimates period has been updated since the 2017-18 Budget announcement to reflect a minor policy change to the measure that will ensure only Australian residents for tax purposes can access the main residence exemption, as well as extending the application of the transitional arrangements for the main residence exemption for a further 12 months to 30 June 2020.

Human rights implications:  This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 4, paragraphs 4.1 to 4.4.

Compliance cost impact:  These measures are expected to result in a minor overall compliance cost impact, comprising a small implementation impact and a small increase in on‑going costs for taxpayers that are foreign residents.

Capital gains tax incentive for investments in affordable housing

Schedule 2 to the Primary Bill amends the ITAA 1997 to provide an additional affordable housing capital gains discount. The additional discount of up to 10 per cent applies if a CGT event occurs to an ownership interest in residential premises that has been used to provide affordable housing.

Date of effectThis measure applies to capital gains realised by investors from CGT events occurring on or after 1 January 2018 for affordable housing tenancies that start before, on or after 1 January 2018.

Proposal announcedThis measure was announced by the Treasurer on 9 May 2017 in the 2017-18 Budget as ‘Reducing pressure on housing affordability — expanding tax incentives for investments in affordable housing’.

Financial impactThis measure is estimated to result in a cost to revenue of $15 million over the forward estimates period comprising:

2016-17

2017-18

2018-19

2019-20

2020-21

-

-

..

-$5m

-$10m

.. Not zero, but rounded to zero

- Nil

Human rights implications:  This Schedule engages human rights. See Statement of Compatibility with Human Rights — Chapter 4, paragraphs 4.5 to 4.15.

Compliance cost impactThis measure is expected to result in a small overall compliance cost impact, comprising a small implementation impact and a small increase in on‑going costs.

Near-new dwelling exemption certificates

Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 enables a reconciliation payment to be made by developers who sell dwellings to foreign persons under a near‑new dwelling exemption certificate.

Date of effect1 July 2017

Proposal announcedBudget 2017-18

Financial impactThis formed part of the 2017-18 Budget measure Streamlining and enhancing the foreign investment framework, and that measure has the following revenue implications:

2016-17

2017-18

2018-19

2019-20

2020-21

-

-$5.1m

-$5.1m

-$5.1m

-$5.1m

 

Human rights implications:  This Schedule does not give rise to any human rights issue. See Statement of Compatibility with Human Rights — Chapter 4, paragraphs 4.16 to 4.28.

 

 


Outline of chapter

1.1                  Schedule 1 to the Primary Bill amends the ITAA 1997 to:

       remove the entitlement to the CGT main residence exemption for foreign residents other than where certain life events occur during the period that a person is a foreign resident where that period is six years or less; and

       modify the foreign resident CGT regime to clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from TARP, the principal asset test is applied on an associate inclusive basis.

1.2                  All legislative references in this Chapter, unless otherwise stated, are to the ITAA 1997 and that referencing at the end of paragraphs, unless otherwise stated, is to the Primary Bill.

Context of amendments

1.3                  As part of the 2017‑18 Budget, the Government announced a range of reforms to reduce pressure on housing affordability. Schedule 1 to the Primary Bill implements two of the reforms to the operation of the CGT rules for foreign residents.

1.4                  Another reform to the CGT rules for foreign residents is contained in the Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017. That Act modified the foreign resident capital gains withholding payments regime from 1 July 2017 to:

       increase the withholding rate to 12.5 per cent; and

       reduce the withholding threshold to $750,000.

Main residence exemption

1.5                  The amendments in Part 1 of Schedule 1 to the Primary Bill generally remove the entitlement to the CGT main residence exemption for foreign residents that have dwellings that qualify as their main residence. Therefore any such capital gain or loss arising upon disposal of a foreign resident’s main residence generally needs to be recognised.

1.6                  However, an individual who has been a foreign resident for six years or less at the time of the CGT event, may still be entitled to the main residence exemption if certain life events occur.

1.7                  The main residence exemption disregards a taxpayer’s capital gain or loss for CGT purposes (providing an exemption) if:

       the taxpayer is an individual; and

       the dwelling was the taxpayer’s main residence throughout the ownership period.

1.8                  The main residence exemption also provides a partial exemption if the dwelling was the taxpayer’s main residence for only part of the ownership period or if it was also used in part to produce assessable income.

1.9                  For the purpose of the main residence exemption, a dwelling includes:

       a building (for example a house) or part of a building (for example, an apartment or townhouse) that consists wholly or mainly of accommodation;

       a caravan, houseboat or other mobile home; and

       any land immediately under the unit of accommodation.

1.10              It also includes adjacent land that, together with the land under the dwelling, does not exceed two hectares, and adjacent structures (for example a storeroom, shed or garage) to the extent that they are used mainly for domestic or private purposes.

1.11              The main residence exemption may also apply to:

       an individual who is a beneficiary in, or any entity that is a trustee of, a deceased estate of a deceased person who used the dwelling as a main residence; and

       the trustee of a trust that is or has been a special disability trust where the dwelling was the main residence of the individual who is or has been:

                 the principal beneficiary of the trust; or

                 another beneficiary who inherits the dwelling upon the death of the principal beneficiary.

Principal asset test

1.12              The amendments in Part 2 of Schedule 1 to the Primary Bill modify the foreign resident CGT regime to clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from TARP, the principal asset test is applied on an associate inclusive basis.

1.13              Under the foreign resident CGT regime, a capital gain or capital loss made by a foreign resident in respect of a membership interest is disregarded unless both the non‑portfolio interest test and the principal asset test are satisfied in relation to the interest.

1.14              The purpose of the non‑portfolio interest test is to establish whether a foreign resident entity has sufficient interest in another entity. The test is satisfied if the sum of the direct participation interests held in the other entity by the foreign resident entity and its associates is 10 per cent or more.

1.15              The purpose of the principal asset test is to determine when an entity’s underlying value is principally derived from TARP. A membership interest held by a foreign resident in another entity will pass the principal asset test if the sum of the market values of that entity’s assets that are TARP exceed the sum of the market values of its assets that are non‑TARP.

Summary of new law

1.16              Schedule 1 to the Primary Bill amends the ITAA 1997 to:

       remove the entitlement to the CGT main residence exemption for foreign residents, other than where certain life events occur during the period that a person is a foreign resident where that period is six years or less; and

       clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from TARP under the foreign resident CGT regime, the principal asset test is applied on an associate inclusive basis.

Comparison of key features of new law and current law

New law

Current law

Main residence exemption individuals

Generally, individuals who are foreign residents at the time a CGT event occurs to a dwelling (or for a compulsory acquisition, a part of a dwelling) in which they have an ownership interest are not entitled to the CGT main residence exemption.

However, individuals who have been foreign residents for a period of six years or less may be able to access the CGT main residence exemption if, during the period of that foreign residency, certain life events occurred.

Individuals who are foreign residents are entitled to the CGT main residence exemption in the same way as individuals who are residents of Australia for taxation purposes.

Main residence exemption deceased is foreign resident at time of death

A trustee of a deceased estate is not entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual if the deceased was an excluded foreign resident at the time of death.

A beneficiary of a deceased estate is not entitled to the portion of the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual if the deceased was an excluded foreign resident at the time of death.

A trustee of a deceased estate is entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual who was a foreign resident at the time of death in the same way as if the deceased had been a resident at that time.

A beneficiary of a deceased estate is entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual who was a foreign resident at the time of death in the same way as if the deceased had been a resident at that time.

Main residence exemption beneficiary of deceased estate is a foreign resident

A beneficiary of a deceased estate is entitled to the portion of the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual if the deceased was not an excluded foreign resident at the time of death. This applies even if the beneficiary is a foreign resident at the time a CGT event occurs to the dwelling. However, the beneficiary is denied any additional component of the main residence exemption that they are otherwise entitled to in their own right if they are a foreign resident at the time a CGT event occurs to the dwelling.

A beneficiary of a deceased estate is entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual if the beneficiary is a foreign resident in the same way as individuals who are residents of Australia for taxation purposes.

Main residence exemption special disability trusts

A trustee of a special disability trust is not entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling if the principal beneficiary of the trust was a foreign resident and did not satisfy the life events test concerning the dwelling.

A trustee of a special disability trust is not entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling if the principal beneficiary was an excluded foreign resident at the time of their death.

A beneficiary who receives an ownership interest in a main residence at the time of death of the principal beneficiary of a special disability trust is not entitled to the CGT main residence exemption accrued by the special disability trust if the principal beneficiary was an excluded foreign resident at the time of their death.

 

A trustee of a special disability trust is entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling if the principal beneficiary of the trust was a foreign resident at the time a CGT event occurs to the dwelling. This applies in the same way as if the principal beneficiary had been a resident at that time.

A trustee of a special disability trust is entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling if the principal beneficiary of the trust was a foreign resident at the time of their death. This applies in the same way as if the principal beneficiary had been a resident at that time.

A beneficiary who receives an ownership interest in a main residence by the principal beneficiary of a special disability trust is entitled to the CGT main residence exemption accrued by the special disability trust. This includes where the principal beneficiary was a foreign resident at the time of their death. The exemption applies in the same way as if the principal beneficiary had been a resident at that time.

Principal asset test

Under the foreign resident CGT regime, a capital gain or capital loss made by a foreign resident in respect of a membership interest is disregarded unless both the non‑portfolio interest test and the principal asset test are satisfied in relation to the interest.

The principal asset test applies in relation to certain membership interests held by a foreign resident entity in another entity and is satisfied if the market value of the other entity’s TARP assets exceeds the market value of its non-TARP assets.

For these purposes, if the entity being tested holds a membership interest in another entity, the membership interest is treated as if it were two assets — a TARP asset and a non‑TARP asset. However, the market value of the TARP asset is taken to be nil if the total participation interests held by the holding entity and its associates in the other entity is less than 10 per cent.

Under the foreign resident CGT regime, a capital gain or capital loss made by a foreign resident in respect of a membership interest is disregarded unless both the non‑portfolio interest test and the principal asset test are satisfied in relation to the interest.

The principal asset test applies in relation to certain membership interests held by a foreign resident entity in another entity and is satisfied if the market value of the other entity’s TARP assets exceeds the market value of its non-TARP assets.

For these purposes, if the entity being tested holds a membership interest in another entity, the membership interest is treated as if it were two assets — a TARP asset and a non‑TARP asset. However, the market value of the TARP asset is taken to be nil if the entity’s direct participation interest, or the holding entity’s total participation interest, in the other entity is less than 10 per cent.

Detailed explanation of new law

Main residence exemption

1.17              The amendments to the main residence exemption are contained in Part 1 of Schedule 1 to the Primary Bill. Individuals who are foreign residents at the time a CGT event occurs to a dwelling in which they have an ownership interest are generally not entitled to the main residence exemption for any part of the exemption that arises from their use of the dwelling.

1.18              For individuals that have an ownership interest in a dwelling, the most common CGT event is CGT event A1 which occurs on the sale or disposal of that interest. CGT event A1 occurs at the time a contract is entered into. Other CGT events that may apply are listed in section 118‑110 and the details and timing of when they occur are contained in Division 104.

1.19              As the main residence exemption does not generally apply, affected foreign residents need to recognise the capital gain or loss that arises from the CGT event. If it is:

       a capital gain the amount of the capital gain would be determined, then offset by any current year and prior year capital losses, then the remaining capital gain would be reduced by any discount capital gain, after which the remaining capital gain would be added with any other capital gains for the income year and included in assessable income (refer to section 102-5 for further details); or

       a capital loss the amount of that loss would be determined and then be available to offset first against the current income year and then future income years’ capital gains (refer to section 102‑10 for further details).

1.20              An individual who has been a foreign resident for six years or less may be able to access the main residence exemption if certain life events occur during that period of foreign residency. There are no other changes to the CGT main residence exemption provisions.

1.21              For the purposes of the main residence exemption a dwelling includes the land on which the dwelling is located.

1.22              An individual is a foreign resident if they are not an Australian resident for taxation purposes (as defined in section 6 of the ITAA 1936). Individuals who are Australian residents for taxation purposes at the time a CGT event occurs to a dwelling are not affected by this measure.

Example 1.1 Residency status of working visa holder

James, a New Zealander, moves to Australia in July 2018 and obtains a special category visa. He purchases a dwelling in Australia and establishes it as his main residence. He is a resident of Australia for taxation purposes while he resides here. James continues to reside in the dwelling for several years. He signs a contract to sell the dwelling, departing Australia several months later (to return to live in New Zealand).

James was an Australian resident for taxation purposes at the time CGT event A1 occurs to the dwelling that is, when he signs the contract to sell it. As James was not a foreign resident at the time CGT event A1 occurred he is entitled to the main residence exemption in respect of his ownership of the dwelling.

1.23              To give effect to this measure amendments are made to the main residence exemption provisions in Subdivision 118‑B.

General anti-avoidance provisions

1.24              The main residence exemption that may otherwise apply, does not apply if the Commissioner makes a determination that the general anti‑avoidance provisions apply. This will occur where, based on an objective consideration by the Commissioner, the Commissioner determines that an arrangement has been entered into by a person for the sole or dominant purpose of enabling that person or another person to obtain the main residence exemption.

Main residence for the whole of the ownership period

1.25              The main residence exemption does not generally apply if, at the time a CGT event occurs to an ownership interest in a dwelling, the individual that owns it was a foreign resident. However, an individual who has been a foreign resident for six years or less may be able to access the CGT main residence exemption if certain life events occur during their period of foreign residency. [Schedule 1, item 4, subsection 118‑110(3)]

1.26              Furthermore, if at the time the CGT event occurs the individual is a resident for taxation purposes in Australia, they continue to be eligible for the CGT main residence exemption (provided they satisfy the other existing requirements).

1.27              The main residence exemption applies to disregard a capital gain or loss in relation to a CGT event that happens to a CGT asset that is an ownership interest in a dwelling if:

       it is held by an individual;

       the dwelling was, or was taken to be, the main residence of the individual throughout their ownership period; and

       the interest did not pass to the individual as a beneficiary in, or as trustee of, the estate of a deceased person.

1.28              The main residence extension provisions that allow a dwelling to be taken to be a main residence in certain circumstances continue to apply. They include moving into a dwelling, changing main residences, absences and repairing or renovating a dwelling.

1.29              The main residence exemption continues to be apportioned if part of the dwelling to which the main residence exemption would otherwise apply was used for income producing purposes.

Example 1.2 Main residence exemption denied

Vicki acquired a dwelling in Australia on 10 September 2010, moving into it and establishing it as her main residence as soon as it was first practicable to do so.

On 1 July 2018 Vicki vacated the dwelling and moved to New York. Vicki rented the dwelling out while she tried to sell it. On 15 October 2020 Vicki finally signs a contract to sell the dwelling with settlement occurring on 13 November 2020. Vicki was a foreign resident for taxation purposes on 15 October 2020.

The time of CGT event A1 for the sale of the dwelling is the time the contract for sale was signed, that is 15 October 2020. As Vicki was a foreign resident at that time she is not entitled to the main residence exemption in respect of her ownership interest in the dwelling.

Note: This outcome is not affected by:

       Vicki previously using the dwelling as her main residence; and

       the absence rule in section 118-145 that could otherwise have applied to treat the dwelling as Vicki’s main residence from 1 July 2018 to 15 October 2020 (assuming all of the requirements were satisfied).

Example 1.3 Main residence exemption applies

Amita acquired a dwelling in Australia on 20 February 2003, moving into it and establishing it as her main residence as soon as it was first practicable to do so. On 15 August 2021 Amita signs a contract to sell the dwelling and settlement occurs on 12 September 2021.

Amita used the dwelling as follows during the period of time for which she owned it:

       residing in the dwelling from when she acquired it until 1 October 2007;

       renting it out from 2 October 2007 until 5 March 2011 while she lived in a rented home in Paris as a foreign resident (assume the absence provision applies to treat the dwelling as her main residence);

       residing in the dwelling and using it as a main residence from 6 March 2011 until 15 April 2012;

       renting it out from 16 April 2012 until 10 June 2017 while she lived in a rented home in Hong Kong as a foreign resident (assume the absence provision applies to treat the dwelling as her main residence); and

       residing in the dwelling from 11 June 2017 until it was sold.

The time of CGT event A1 for the sale of the dwelling is the time the contract for sale was signed, that is 15 August 2021. As Amita was an Australian resident for taxation purposes at that time (as she had re‑established her Australian residency) she is entitled to the full main residence exemption for her ownership interest in the dwelling as it is, or is taken to be, her main residence for the whole of the time that she owned it.

Main residence for part of the ownership period

1.30              The partial main residence exemption generally no longer applies if, at the time a CGT event occurs to the ownership interest in a dwelling, the individual that owns it is a foreign resident. [Schedule 1, item 11, paragraphs 118‑185(3)(a) and (b)]

1.31              An individual who has been a foreign resident for six years or less may be able to access the partial main residence exemption if certain life events occur during that period of foreign residency. [Schedule 1, item 11, paragraphs 118‑185(3)(a) and (b)]

1.32              The main residence exemption continues to apply to Australian residents to partially disregard a capital gain or loss from a CGT event that happens to a CGT asset that is an ownership interest in a dwelling if:

       it is held by an individual;

       the dwelling was, or was taken to be, the main residence of the individual for part of their ownership period; and

       the interest did not pass to the individual as a beneficiary in, or as trustee of, the estate of a deceased person.

1.33              The partial main residence exemption applies to exempt the portion of the capital gain or loss that relates to the period when the dwelling was the individual’s main residence. The individual accounts for the portion of the capital gain or loss for the period they owned the dwelling for which it was not their main residence in the manner set out in paragraph 1.19 (apportioned on a number of days basis).

1.34              The special rule in section 118-192 where a dwelling that is a main residence is first used to produce income to assist in working out a capital gain or loss made from a dwelling generally does not apply if at the time a CGT event occurs to the ownership interest in a dwelling, the individual that owns it is a foreign resident. This is because the requirement for the rule to apply — that the individual is entitled to a partial main residence exemption at the time a CGT event occurs to the dwelling — is generally not satisfied in such cases.

1.35              In other respects the partial main residence exemption applies in the same way as the full main residence exemption.

Example 1.4 Partial main residence exemption denied

Terry acquired a dwelling on 20 August 2008.

On 13 November 2020 Terry signs a contract to sell the dwelling and settlement occurs on 11 December 2020. At this time he was a foreign resident.

Terry used the dwelling as follows during the period of time for which he owned it:

       establishing the dwelling as a main residence and residing there from when he acquired the property until 31 January 2010;

       renting it out from 1 February 2010 until 5 June 2011;

       re‑establishing the dwelling as his main residence and residing there from 6 June 2011 until 17 June 2020; and

       leaving the property vacant from 18 June 2020 until it was sold. From 19 June 2020 Terry resided in London as a foreign resident.

The time of CGT event A1 for the sale of the dwelling is the time the contract for sale was signed, that is 13 November 2020. As Terry was a foreign resident at that time he is not entitled to the main residence exemption in respect of his ownership interest in the dwelling, even though he used the dwelling as his main residence for part of the time that he owned it.

Terry first used the dwelling to produce assessable income, by renting it out, on 1 February 2010. However, the special rule for when a dwelling is first used to produce assessable income (which would allow him to be taken to have acquired the dwelling for its market value at that time) will not apply. This because he is not entitled to a partial main residence exemption at the time the CGT event occurs. This is because Terry was a foreign resident at the time CGT event A1 occurs to the dwelling.

Part of the property on which the main residence is located is compulsorily acquired

1.36              The main residence exemption also no longer applies if the individual is a foreign resident at the time a CGT event occurs to part of their ownership interest in a dwelling as a result of a compulsory acquisition. An individual who has been a foreign resident for six years or less at the time a CGT event occurs to part of their ownership interest in a dwelling as a result of a compulsory acquisition may still be able to access the CGT main residence exemption if certain life events occur. [Schedule 1, item 29, paragraphs 118‑245(3)(a) and (b)]

1.37              This component of the main residence exemption applies where a part, but not the whole, of an ownership interest in a dwelling that is a main residence is being compulsorily acquired. Examples where this may occur include a compulsory acquisition of:

       adjacent land, for example for a transport corridor; and

       rights over the adjacent land that restrict its use, for example placing an easement over part of the property to use it as a corridor for utilities or drainage.

Example 1.5 Compulsory acquisition of land adjacent to dwelling that is a main residence

Samuel acquired a dwelling on 23 July 2016 on a 1,000 square metre block of land. He moved into it and established it as his main residence as soon as it was first practicable to do so.

Samuel used the dwelling as follows from when he acquired it:

       residing in the dwelling until 24 June 2018; and

       renting it out from 25 June 2018, when he started living in a rented residence in Los Angeles as a foreign resident (assume the absence rule applies to treat the dwelling as his main residence).

On 16 June 2021 the local council compulsorily resumed 100 square metres of the land on which Samuel’s dwelling was situated. Settlement occurred on 14 July 2021.

The time of the CGT event for the compulsory acquisition of the land occurred on 16 June 2021. As Samuel was a foreign resident at that time he is not entitled to the main residence exemption for the compulsory acquisition of part of his ownership interest in the adjacent land.

Deceased estate where the beneficiary was a foreign resident beneficiary

1.38              If the deceased was a resident of Australia (or was a foreign resident for six years or less) for taxation purposes at the time of death, then the main residence exemption accrued by the deceased for the dwelling continues to be available to the trustee or beneficiary or beneficiaries of the deceased estate that are bequeathed the property. This includes the exemption attributable to:

       the period during the deceased person’s lifetime they used the dwelling as their main residence;

       the period that occurs within two years of the deceased’s death (or within such longer period allowed by the Commissioner); and

       the period following the deceased’s death where the dwelling was the main residence of an individual who was the spouse of the deceased immediately before their death and/or an individual who had a right to occupy the dwelling under the deceased’s will (regardless of the residency status of that spouse or individual).

1.39              However, the beneficiary is denied any additional component of the main residence exemption that they accrued in their own right if they were a foreign resident at the time at which a CGT event occurred to the dwelling. [Schedule 1, item 13, paragraph 118‑195(1A)(b)]

Example 1.6 Foreign resident beneficiary inherits main residence from a deceased person Australian resident at time of death

Con acquired a dwelling on 7 February 2001, moving into it and establishing it as his main residence as soon as it was first practicable to do so. He continued to reside in the property and it was his main residence until his death on 9 August 2017. He was at all times a resident of Australia.

Jacqui, Con’s daughter, inherited the dwelling following Con’s death. Upon inheriting the dwelling, Jacqui rented it out. It was not her main residence at any time. On 25 January 2021 Jacqui signs a contract to sell the dwelling and settlement occurs on 23 February 2021.

Jacqui resides in Buenos Aires and was a foreign resident in the period from 2010 until the time of sale of her ownership interest in the dwelling.

Jacqui is entitled to a partial main residence exemption for the ownership interest that she has in the dwelling at the time she sells it, being the exemption that accrued while Con used the residence as his main residence (7 February 2001 until 9 August 2017). She is not entitled to any main residence exemption that she accrued in respect of the dwelling (9 August 2017 until 25 January 2021). This is because she was an excluded foreign resident on 25 January 2021, the day on which she signed the contract to sell her ownership interest, which is the day on which CGT event A1 occurred.

Note: Jacqui will need to apply section 118‑200 to work out the amount of the capital gain or loss that she realises from the sale of the ownership interest in the dwelling.

If Jacqui had instead sold the dwelling on or before 9 August 2019 she would have been entitled to a full main residence exemption. This is because the whole of the main residence exemption would have, or would be taken to have, accrued from Con’s use of the residence. This includes the two year period following Con’s death.

Deceased estate deceased was foreign resident

1.40              If the deceased person was an excluded foreign resident at the time of their death then the portion of the main residence exemption accrued by the deceased in respect of the dwelling (see paragraph 1.38) is not available to the beneficiary. [Schedule 1, items 12 and 13, paragraphs 118‑195(1)(c) and 118‑195(1A)(a)]

1.41              Beneficiaries continue to be entitled to the main residence exemption for any part of the exemption that they accrue in their own right (provided that they are not a foreign resident at the time the CGT event for the ownership interest in the dwelling occurs). For the purposes of calculating a capital gain or loss, to ensure that no portion of the main residence exemption of the deceased is included, the following apply:

       cost base and reduced cost base the first element of the dwelling’s cost base and reduced cost base for the beneficiary is the cost base and reduced cost base of the deceased as they were immediately before the deceased’s death;

       building, repairing or renovating a dwelling a surviving joint tenant of a dwelling is not able to treat the dwelling as the deceased’s main residence where that dwelling was being built, repaired or renovated if the deceased was a foreign resident at the time of their death; and

       the apportionment calculation the days for which the deceased person (or any deceased person if the property has been bequeathed more than once) held the ownership interest in the dwelling are treated as non‑main residence days. This ensures that no component of the main residence exemption applies for this period.

[Schedule 1, items 6, 15, 16, 17, 18 and 30, subsection 118‑155(5), paragraphs 118‑200(2)(aa), (3)(d), (4)(c) and subsection 118-205(4) and table item 3 in subsection 128‑15(4)]

1.42              The main residence exemption does not apply if:

       the deceased person was an excluded foreign resident at the time of their death; and

       the beneficiary that inherits the ownership interest in the dwelling was a foreign resident at the time the CGT event occurs.

1.43              If the main residence exemption does not apply, the beneficiary must account for the whole of the capital gain or loss (see paragraph 1.19) that accrues on the ownership interest in the dwelling.

1.44              The main residence exemption also does not apply to a trustee that acquires a dwelling under a will from an excluded foreign resident. [Schedule 1, item 20, subsection 118 210(6)]

1.45              In particular, the main residence exemption does not apply to a trustee of a deceased estate if:

       the deceased person was an excluded foreign resident at the time of their death;

       the trustee of the deceased estate acquired a dwelling after the deceased person’s death for an individual to occupy under the terms of the will; and

       the dwelling was later disposed of by the trustee of the deceased estate.

[Schedule 1, item 20, subsection 118‑210(6)]

Example 1.7 Resident beneficiary inheriting a dwelling from a deceased person who was a foreign resident at the time of death

Edwina acquired a dwelling on 7 February 2011, moving into it and establishing it as her main residence as soon as it was first practicable to do so. Edwina used the property as follows:

       residing in the dwelling until 25 September 2016 whilst an Australian resident; and

       renting the property out from 26 September 2016 at which time Edwina moved to Johannesburg.

Edwina passed away on 20 January 2018. At the time of her death, Edwina was a foreign resident for taxation purposes. However, as Edwina was a foreign resident for less than six years, she is not an excluded foreign resident.

Rebecca, an Australian resident, inherits the dwelling from Edwina. Rebecca moves into the dwelling and establishes it as her main residence on 21 April 2018. She continues to reside in it and use it as her main residence until she sells it. She signs the contract to sell the dwelling on 2 February 2021 with settlement occurring on 2 March 2021.

Rebecca is able to access the main residence exception for the whole period of ownership because:

       Edwina was not an excluded foreign resident at the time of her death. This means that the main residence exemption she accrued while she used the dwelling as her main residence is available to Rebecca; and

       the whole period between when Edwina passed away and when Rebecca moved into the dwelling and established it as her main residence is less than two years.

Rebecca is also able to access the main residence exemption for the period from when she moved into the property until she signed the contract for sale as she used the property as her main residence at all times and was an Australian resident at the time of the sale.

Therefore Rebecca is able to access the main residence exemption for the entire ownership period.

Australian residency ends

1.46              Schedule 1 to the Primary Bill amends the main residence exemption so it does not apply if CGT events I1 or I2 occur to an ownership interest in a dwelling. [Schedule 1, items 3, 14 and 19, paragraphs 118‑110(2)(a), 118‑195(2)(a) and 118‑210(5)(a)]

1.47              CGT event I1 and I2 may occur to dwellings that are a unit of accommodation that is a caravan, houseboat or other mobile home (mobile homes). They do not apply to dwellings that are TARP (which for this measure is real property situated in Australia (including leases of land)).

1.48              CGT events I1 and I2 happen at the time an individual or trust stops being a resident of Australia for taxation purposes. When the CGT event happens:

       for CGT events I1 and I2 — the individual or trustee of the trust must consider each CGT asset that they owned just before Australian residency ended, determine if a capital gain or loss has been made on them and account for any capital gains or losses (in the way outlined in paragraph 1.19). For the purpose of working out that capital gain or loss the taxpayer is taken to have disposed of the CGT asset for its market value at that time; or

       for CGT event I1 — an individual may also defer the CGT liability by choosing to disregard the capital gain or loss that arises from CGT event I1 occurring. However, if they choose to do so the CGT asset will be taken to be TARP until either another CGT event occurs to that asset or the person once again becomes an Australian resident.

1.49              The amendments that affect the entitlement to the main residence exemption where CGT events I1 and I2 occur ensure consistent application of the exemption, whether a foreign resident has an ownership interest in a dwelling that is real property or a mobile home. Without this change, the main residence exemption would be available for a mobile home at the time the owner changes their residency (as CGT events I1 or I2 occur at this time), but not for real property in the same circumstances (as no CGT event occurs at this time).

Special disability trusts

1.50              The main residence exemption applies to a dwelling held by a special disability trust for the benefit of its principal beneficiary provided this beneficiary uses it as their main residence. The main residence exemption applies in this way to enable it to apply to a special disability trust in the same way as it would if the principal beneficiary had directly owned the dwelling.

1.51              The main residence exemption no longer applies if:

       at the time a CGT event occurs to the ownership interest in a dwelling of a special disability trust, the principal beneficiary of that trust was a foreign resident (unless that principal beneficiary satisfies the life events test); or

       a CGT event occurs to a dwelling while it is held by the trustee of the special disability trust after the death of the principal beneficiary and at the time of death the principal beneficiary was an excluded foreign resident.

[Schedule 1, items 23 and 25, note to subsection 118-218(1) and subsection 118‑225(5)]

1.52              Any component of the main residence exemption that was accrued by the special disability trust while it held the dwelling on behalf of the principal beneficiary is denied to a beneficiary[1] that acquires the dwelling after the principal beneficiary’s death if, at the time of death, the principal beneficiary was an excluded foreign resident. The first element of the dwelling’s cost base and reduced cost base for the beneficiary are the cost base and reduced cost base of the special disability trust as they were immediately before the deceased’s death. [Schedule 1, items 25 and 26, subsection 118‑225(5) and paragraph 118‑227(1)(ca)]

1.53              This ensures that the main residence exemption for a special disability trust that holds a dwelling on behalf of a principal beneficiary continues to operate in the same way as the main residence exemption does for an individual that holds a dwelling in their own right.

Consequential amendments

1.54              Schedule 1 to the Primary Bill also makes consequential amendments to the guide material, examples and notes contained in the law for the main residence exemption to reflect the substantive amendments. [Schedule 1, items 1, 2, 5, 7 to 10, 21, 22, 27 and 28, section 118‑100, examples following subsections 118‑145(4), 118‑170(4), 118‑178(2) and 118‑185(2) and notes to sections 118‑105, 118‑215 and 118‑240]

Certain life events

1.55              The amendments in Schedule 1 to the Primary Bill allow a foreign resident to continue to access the main residence CGT exemption for CGT events concerning certain life events if they have been a foreign resident for a continuous period of six years or less at the time of the CGT event (ie they are not an ‘excluded foreign resident’). [Schedule 1, item 4, subsections 118-110(3), (4) and (5)]

Excluded foreign resident

1.56              An ‘excluded foreign resident’ is a person who, at the time of the CGT event, has been a foreign resident for a continuous period of more than six years. A person who is an ‘excluded foreign resident’ (eg a long term non-resident) is not able to access the CGT main residence exemption even if certain life events occur. [Schedule 1, item 4, subsection 118‑110(4)]

1.57              A beneficiary of a person’s estate, or a person surviving the foreign resident, may be able to access the main residence exemption, provided that at the time of the foreign resident’s death they were not an ‘excluded foreign resident’ (i.e. they had not been a foreign resident for a continuous period of more than six years). [Schedule 1, items 6, 12, 13, 15, 16, 17, 18, 20, 25, 26, 30,  subsections 118-155(5), 118-195(1A), 118-205(4), 118-210(6), 118‑225(5) and 128-15(4), paragraphs 118-195(1)(c), 118-200(2)(aa), 118-200(3)(d), 118-200(4)(c) and 118-227(1)(ca)]

The life events test

1.58              A foreign resident may be able to access the CGT main residence exemption if they satisfy the ‘life events test’. [Schedule 1, item 4, subsection 118-110(5)]

1.59              The first element of the life events test requires that at the time of the CGT event, the person has been a foreign resident for a continuous period of six years or less. [Schedule 1, item 4, paragraph 118-110(5)(a)]

1.60              The second element of the life events test is that during the person’s period of foreign residency, one of the specified circumstances occurred or the CGT event occurred in relation to a family law matter. [Schedule 1, item 4, paragraph 118‑110(5)(b)]

Terminal medical condition

1.61              If, during all or part of the period of a person’s foreign residency, either they, their spouse or their child who was under 18 years of age had a ‘terminal medical condition’, then they will satisfy this element of the test. [Schedule 1, item 4, subparagraphs 118-110(5)(b)(i) and (ii)]

1.62              A ‘terminal medical condition’ has the meaning given by regulation 303-10.01 of the Income Tax Assessment Regulations 1997. This requires, amongst other things, that two medical practitioners, jointly or separately, have certified that the illness, or injury, the affected person suffers from is likely to result in their death within 24 months of the certification. [Schedule 1, item 4, subparagraphs 118-110(5)(b)(i) and (ii)]

1.63              For a child of the foreign resident, it is necessary that during at least part of the period of foreign residency the child was suffering from a terminal medical condition. [Schedule 1, item 4, subparagraph 118-110(5)(b)(ii)]

Death

1.64              If, during a person’s period of foreign residency, their spouse, or their child who is under 18 years of age at the time of their death dies, then the person will satisfy this element of the test. [Schedule 1, item 4, subparagraph 118-110(5)(b)(iii)]

Divorce or separation

1.65              If the CGT event occurs because of a matter referred to in a paragraph of subsection 126-5(1) (family law) involving the person or their spouse (or former spouse) the person will satisfy this element of the test. The matters referred to in subsection 126-5(1) involve the distribution of assets between the person and their spouse in a family law context, such as in the event of divorce or separation or similar maintenance agreements. This includes where an enforceable distribution takes place under a corresponding foreign law. [Schedule 1, item 4, subparagraph 118-110(5)(b)(iv)]

1.66              If the CGT event has not occurred because of one of the matters in subsection 126-5(1), then the person is not able to access the main residence exemption even if the matter has occurred during their period of foreign residency. [Schedule 1, item 4, subparagraph 118-110(5)(b)(iv)]

Consequential amendments

1.67              The terms ‘excluded foreign resident’ and ‘life events test’ are included in the dictionary in subsection 995-1(1). [Schedule 1, item 31, subsection 995-1(1) definitions of ‘excluded foreign resident’ and ‘life events test’]

Example 1.8 Main residence exemption – life events test

Joan acquired a dwelling on 7 February 2015, moving into it with her spouse John and establishing it as their main residence as soon as it was first practicable to do so. Joan and John are residents of Australia at the time of the purchase of the property. In 2020 they retire to live in the Bahamas and acquire a new residence there. They become foreign residents at this time. They rent out their former Australian residence after they leave Australia and it is not maintained as their main residence in the rental period. In 2021 John dies and Joan decides to sell their former residence. As Joan has been a foreign resident for less than six years at the time of entering into the CGT event for the sale and her spouse has passed away during the period of her foreign residency, she is entitled to a partial main residence exemption for the sale of the residence based on the period that it was her main residence.

Principal asset test

1.68              The amendments in Part 2 of Schedule 1 to the Primary Bill modify the foreign resident CGT regime to clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from TARP, the principal asset test is applied on an associate inclusive basis. This will remove any doubt that disaggregated holdings of membership interests are properly taken into account when applying the principal asset test.

1.69              Under the foreign resident CGT regime, a capital gain or capital loss made by a foreign resident in respect of a membership interest is disregarded unless both the non‑portfolio interest test (section 960‑195) and the principal asset test (section 855‑30) are satisfied in relation to the interest.

1.70              The principal asset test applies in relation to certain membership interests held by a foreign resident entity in another entity. The test is satisfied if the market value of the other entity’s TARP assets exceeds the market value of its non-TARP assets.

1.71              For these purposes, if the entity being tested holds a membership interest in another entity, the membership interest is treated as if it were two assets a TARP asset and a non‑TARP asset. However, the market value of the deemed TARP asset is taken to be nil if the total participation interests (as defined in section 960‑180) held in the other entity by the foreign resident holding entity and its associates (as defined in section 318 of the ITAA 1936) is less than 10 per cent. That is, the holding entity’s total participation interests are worked out on an associate inclusive basis. [Schedule 1, item 34, item 1 of the table in subsection 855‑30(4)]

1.72              In determining the holding entity’s total participation interests in the other entity on an associate inclusive basis, the following amounts will be added together:

       the holding entity’s direct participation interest (as defined in section 960‑190) and indirect participation interest (as defined in section 960‑185) in the other entity; and

       if an entity is an associate of the holding entity, the associate entity’s direct participation interest and indirect participation interest in the other entity.

1.73              However, applying the principal asset test on an associate inclusive basis may result in a particular direct participation interest or indirect participation interest being counted more than once. Therefore, for the purposes of working out the total participation interests held by the holding entity and its associates, each particular direct participation interest and indirect participation interest held in the other entity is counted only once. [Schedule 1, item 35, subsection 855‑30(4A)]  

Example 1.9 Operation of the principal asset test

An Australian entity, Aus Land Rich Co, holds land (which is TARP).

Foreign Resident has an indirect interest in Aus Land Rich Co through its wholly owned subsidiaries:

       A Co which holds 9 per cent of the membership interests in Aus Land Rich Co; and

       B Co which holds 7 per cent of the membership interests in Aus Land Rich Co.

Foreign Resident simultaneously disposes of its interests in A Co and B Co.


 

The non-portfolio interest test (section 960‑195) is satisfied in relation to each of these holdings as Foreign Resident holds more than 10 per cent of the membership interests in A Co and B Co respectively.

The principal asset test (section 855‑30) will be satisfied in relation to each of these holdings if the market value of A Co’s and B Co’s TARP assets exceeds the market value of their non‑TARP assets.

In applying the principal asset test, the membership interests A Co and B Co hold in Aus Land Rich Co are treated as if they were two assets  a TARP asset and a non‑TARP asset.

Under item 1 of the table in subsection 855‑30(4), the market value of the deemed TARP asset will be taken to be nil if the total participation interests Foreign Resident and its associates hold in Aus Land Rich Co is less than 10 per cent. However, the item does not apply because the total participation interests Foreign Resident and its associates (A Co and B Co) hold in Aus Land Rich Co is 16 per cent.

Consequently, for the purpose of applying the principal asset test in relation to the interests Foreign Co holds in A Co and B Co, the market value of the deemed TARP asset and the deemed non‑TARP asset must be worked out under item 2 of the table in subsection 855‑30(4).

Application and transitional provisions

1.74              Schedule 1 to the Primary Bill commences on the first day of the next quarter following the day of Royal Assent. [Clause 2]

Main residence exemption

1.75              The amendments to the main residence exemption in Part 1 of Schedule 1 to the Primary Bill generally apply to CGT events happening at or after their announcement at 7.30 pm, by legal time in the ACT, on 9 May 2017 (application time). Accordingly, the amendments to the main residence exemption do not apply prior to its announcement date to ensure that taxpayers are not adversely affected by a retrospective change before being made public. However, the measure needs to generally apply from the date of announcement (subject to a transitional period for some taxpayers see paragraph 1.76) to prevent opportunities for affected taxpayers to dispose of their dwelling and avoid the application of the measure. [Schedule 1, item 33]

1.76              The amendments to the main residence exemption do not apply for certain dwellings held before the application time (see paragraph 1.75). The amendments do not apply to a capital gain or loss from a CGT event that occurs to a dwelling if the CGT event occurs on or before 30 June 2020 if:

       an individual, or trustee of a special disability trust held an ownership interest in the dwelling to which the CGT event relates at all times from immediately before the application time until immediately before the CGT event happens; or

       an individual acquired the property as a beneficiary of a deceased estate and at all times from immediately before the application time until immediately before the CGT event happens to the dwelling, the following entities held the ownership interest in the dwelling:

                 that individual;

                 the deceased person;

                 the trustee of the deceased estate of the deceased person;

                 the trustee of a special disability trust on behalf of a principal beneficiary; or

                 a combination of these entities.

[Schedule 1, item 32, section 118‑110 of the Income Tax (Transitional Provisions) Act 1997]

Example 1.10 Dwelling that is a main residence that was owned before 9 May 2017 is disposed of on or before 30 June 2020

Samantha acquired a dwelling on 13 April 2013 moving into it and establishing it as her main residence as soon as it was first practicable to do so. On 10 January 2019 Samantha signs a contract to sell the dwelling and settlement occurs on 7 February 2019.

Samantha used the dwelling as follows when she owned it:

       residing there until 15 September 2016; and

       renting the property out from 16 September 2016 until it was sold (assume the absence provision applies to treat the dwelling as her main residence during this later period).

From 16 September 2016 Samantha resided in rented accommodation in Bahrain and was a foreign resident.

CGT event A1 for the sale of the dwelling occurs when the contract for sale was signed, that is 10 January 2019. As Samantha held her ownership interest in the dwelling on or before 9 May 2017, she continued to own it until it was sold and as it was sold before 1 July 2020 she is entitled to the main residence exemption under the transitional rule.

Principal asset test

1.77              The amendments in Part 2 of Schedule 1 to the Primary Bill clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from TARP under the foreign resident CGT regime, the principal asset test is applied on an associate inclusive basis. These amendments apply in relation to CGT events happening on or after announcement at 7.30 pm, by legal time in the ACT, on 9 May 2017. Accordingly, the amendments to the principal asset test do not apply prior to the announcement date to ensure that taxpayers are not adversely affected by a retrospective change. However, the amendments need to apply from the date of announcement to prevent opportunities for multinational entities to dispose of assets and avoid the application of the amendments after the date of announcement. [Schedule 1, item 34]

 


Outline of chapter

2.1                  Schedule 2 to the Primary Bill amends the ITAA 1997 to provide an additional affordable housing capital gains discount. The additional discount of up to 10 per cent applies if a CGT event occurs to an ownership interest in residential premises that has been used to provide affordable housing.

2.2                  All legislative references in this Chapter, unless otherwise stated, are to the ITAA 1997 and that referencing at the end of paragraphs, unless otherwise stated, is to the Primary Bill.

Context of amendments

2.3                  In the 2017‑18 Budget, the Government announced a package of measures to improve outcomes across the housing sector, from Australians struggling to put a roof over their head to those in affordable housing, private renters and first home buyers.

2.4                  Several of these measures specifically address housing affordability for members of the community earning low to moderate incomes by providing incentives for investors to increase the supply of affordable housing that is available. Having access to affordable housing on a long‑term basis will help to support Australian households manage life’s challenges and assist in relieving the pressure from rising cost of living.

2.5                  The Government recognises that increased private investment is required to provide more Australians with access to affordable rental housing. This measure provides a CGT incentive for investment in affordable housing.

2.6                  This measure provides an additional incentive to individual and institutional investors to increase the supply of affordable housing by allowing investors (including resident investors in MITs) to retain an increased amount of the capital gains they realise from their investments in affordable housing. Individual investors may invest by holding an ownership interest in affordable housing directly or through certain trusts.

2.7                  States and territories have their own affordable housing policies which are designed to encourage housing investment and the Government’s affordable housing measures are intended to complement these existing policies. In this regard, the intent is not to duplicate or interfere with existing state and territory housing policies that operate to define affordable housing in each jurisdiction, including in relation to tenant eligibility and rent setting.

2.8                  Capital gains arising from CGT assets of individuals that they hold for at least 12 months generally receive a 50 per cent capital gains discount. The individual’s net capital gain (including a discounted capital gain) forms part of their assessable income. This amount, and the individual’s other assessable income less allowable deductions forms their taxable income which is taxed at marginal tax rates.

Summary of new law

2.9                  Schedule 2 to the Primary Bill encourages investment in affordable housing for members of the community earning low to moderate incomes. This is achieved by allowing investors to have an additional affordable housing capital gains discount of up to 10 percent in relation to an ownership interest in a dwelling that is residential premises that has been used to provide affordable housing. By reducing the CGT that is payable upon disposal of affordable housing, it ensures that a greater proportion of the gain realised at disposal is retained by the investor.

2.10              The additional capital gains discount applies to investments by individuals directly in affordable housing or investments in affordable housing by individuals through trusts (other than public unit trusts and superannuation funds), including MITs to the extent the distribution or attribution is to the individual and includes such a capital gain.

Comparison of key features of new law and current law

New law

Current law

Individuals direct investment: additional 10 per cent capital gains discount

Individuals are generally entitled to a 50 per cent discount on capital gains for assets held for at least 12 months.

Individuals also are entitled to an additional capital gains discount of up to 10 per cent for capital gains on such assets to the extent they are attributable to capital gains on dwellings used to provide affordable housing for a period or periods totalling at least three years.

Individuals are generally entitled to a 50 per cent discount on capital gains for assets held for at least 12 months.

Individual indirect investment through trusts and MITs: additional 10 per cent capital gains discount

Individuals are generally entitled to a 50 per cent capital gains discount on capital gains that are distributed or attributed to them directly or through an interposed entity from a trust or MIT (if the trust or MIT is entitled to a discount capital gain).

Individuals are also entitled to an additional capital gains discount of up to 10 per cent on capital gains:

       that are distributed or attributed to them directly or through an interposed entity from a trust or MIT; and

       to the extent they are attributable to capital gains on dwellings used to provide affordable housing.

However, the trust or MIT must have used the dwelling to provide affordable housing for a period or periods totalling at least three years.

The interposed entity or trust may be a trust or partnership (other than a public unit trust or superannuation fund).

Individuals are generally entitled to a 50 per cent capital gains discount on capital gains that are distributed or attributed to them directly or through an interposed entity from a trust or MIT (if the trust or MIT is entitled to a discount capital gain).

Detailed explanation of new law

2.11              The additional affordable housing capital gains discount may apply to reduce an individual’s capital gain from a CGT event occurring to a dwelling that was either owned by the individual or a trustee of certain types of trusts in which the individual is a beneficiary (directly or through a partnership or a trust of any of those types). If the individual is eligible for an additional affordable housing capital gains discount it is applied to reduce the capital gain in working out their net capital gain for the income year.

Eligibility for an additional affordable housing capital gains discount

2.12              The additional affordable housing capital gains discount applies separately to each capital gain from affordable housing made by an individual, or distributed or attributed to an individual by certain trusts, if eligibility conditions are met. [Schedule 2, item 2, subsection 115-125(1)]  

2.13              An individual is eligible for an additional affordable housing capital gains discount (direct investment) on a capital gain if they:

       make a discount capital gain from a CGT event happening in relation to a CGT asset that is their ownership interest in a dwelling; and

       used the dwelling to provide affordable housing for at least three years (1095 days) which may be aggregate usage over different periods.

[Schedule 2, item 2, subsection 115‑125(2)]

2.14              An individual will also be eligible for an additional affordable housing capital gains discount on a capital gain (trust investment) if:

       that capital gain was distributed or attributed to them:

      directly from a trust; or

      from a trust through a partnership or another trust;

       the capital gain was a discount capital gain for the trust that realised that gain;

       the dwelling was used to provide affordable housing for at least three years (1095 days) which may be aggregated use in different periods; and

       the trust which used the dwelling to provide affordable housing and any interposed entities (if any) through which the capital gain was distributed or attributed to the individual was one of the following specified entities:

      a trust (other than a public unit trust or a superannuation fund);

      a MIT; or

      a partnership.

[Schedule 2, item 2, subsections 115‑125(2) and (3)]

2.15              This Chapter first explains the requirements to qualify for the capital gains discount for direct investment in affordable housing. Where these differ for trust investments in affordable housing, they are explained later in this Chapter.

CGT event happening in relation to a CGT asset that is an ownership interest in a dwelling

2.16              The CGT event that generally applies to ownership interests in dwellings is CGT event A1 disposals (see section 104-10). However other CGT events can also apply to an ownership interest in a dwelling.

2.17              For this measure, dwelling takes its existing meaning as defined in section 118-115, that is a dwelling includes:

       a building (for example a house) or part of a building (for example an apartment or townhouse) that consists wholly or mainly of accommodation; and

       any land immediately under the unit of accommodation.

2.18              It also includes adjacent land that, together with the land under the dwelling, does not exceed two hectares, and adjacent structures (for example, a storeroom, shed or garage).

2.19              While caravans, houseboats and other mobile homes are included in the definition of dwelling for CGT purposes, only dwellings that are residential premises that are not commercial residential premises can be used to provide affordable housing for the purposes of this measure. Therefore this measure does not apply to caravans, mobile homes and houseboats as they are not residential premises (see paragraph 2.32).

2.20              Section 118-130 provides that an ownership interest in a dwelling is:

       for land — a legal or equitable interest in it or a right to occupy it;

       for a dwelling that is not a flat or home unit — a legal or equitable interest in the land on which it is erected, or a licence or right to occupy it; or

       for a flat or home unit — a legal or equitable interest in a stratum unit in it, a licence or right to occupy it, or a share in a company that owns a legal or equitable interest in the land on which the flat or home is erected and provides a right to occupy it.

Discount capital gain

2.21              For the purposes of this measure a discount capital gain is a capital gain of an individual that:

       resulted from a CGT event happening to an ownership interest in a dwelling which the individual has owned for at least 12 months; and

       the cost base was worked out without the application of indexation.

2.22              A discount capital gain includes an amount that is treated as a capital gain of an individual under section 115-215 for the purposes of calculating their net capital gain where that individual is entitled to the capital gains tax discount. An individual’s capital gains from the application of section 115-215 are those capital gains realised by trusts that have been distributed, either directly or through an interposed entity to that individual (see paragraphs 2.51 to 2.53 below).

2.23              Capital gains realised by trusts include capital gains that have been attributed to a resident individual by an AMIT to which subsection 276‑80(2) has applied. This provision treats the member as having derived, received or made the amount reflected in the determined member component in the same circumstance as the AMIT derived, received or made it.

Used the dwelling to provide affordable housing

2.24              The additional affordable housing capital gains discount only applies to certain capital gains if the dwelling in which the ownership interest was held was used to provide affordable housing for a period or periods totalling three (1095 days) or more years after 1 January 2018. The capital gain must have been realised by an individual or be a capital gain that was distributed or attributed (directly or via a partnership or certain trusts) to an individual by certain trusts. The period that the dwelling was used to provide affordable housing may be a continuous period or an aggregation of periods totalling three or more years. [Schedule 2, item 2, subsection 115‑125(2)]

Example 2.1 — Aggregated period of affordable housing use

Lisa signs a contract to acquire a dwelling that is residential premises (but not commercial residential premises) on 15 August 2018.

Lisa used the dwelling as follows when she owned it:

       left it vacant  and undertook repairs from when she acquired it on 15 August 2018 (the acquisition date for CGT purposes) until 1 December 2018 (109 days);

       rented it out by providing affordable housing from 2 December 2018 until 20 August 2020 (628 days);

       rented it out through a real estate property manager at market rates (that is not providing affordable  housing) from 21 August 2020 until 31 August 2021 (376 days);

       rented it out by providing affordable housing from 1 September 2021 until 15 January 2023 (502 days); and

       vacated the property and prepared it for sale on and after 16 January 2023 (57 days).

On 13 March 2023 Lisa signed a contract to sell the dwelling with settlement occurring on 11 April 2023.

Lisa has held the dwelling for a total of 1,672 days of which it was used to provide affordable housing for 1,130 days. As the dwelling was used to provide affordable housing for more than 1,095 days, Lisa is eligible for the additional affordable housing capital gains discount (assuming the dwelling meets the other requirements).

2.25              Under section 980-5, a dwelling is used to provide affordable housing on a day if the following conditions are satisfied:

       residential premises condition — the dwelling is TARP and is residential premises that is not commercial residential premises and is tenanted or available to be tenanted;

       property management condition — the tenancy of the dwelling or its occupancy is exclusively managed by an eligible community housing provider;

       providing affordable housing certification condition — the eligible community housing provider has given each entity that holds an ownership interest in the dwelling certification that the dwelling was used to provide affordable housing;

       NRAS condition — no entity that has an ownership interest in the dwelling is entitled to receive an NRAS incentive for the NRAS year; and

       MIT membership condition — if the ownership interest in the dwelling is owned by a MIT the tenant does not have an interest in the MIT that passes the non-portfolio test.

2.26              To satisfy the requirements to receive the additional affordable housing CGT discount, the affordable housing use must have occurred on or after 1 January 2018 (the day this measure applies from).

Residential premises condition

2.27              Under paragraph 980-5(a), the residential premises condition is satisfied if the dwelling is:

       TARP;

       residential premises that are not commercial residential premises; and

       tenanted or available to be tenanted.

2.28              The term ‘TARP’ is defined in section 855‑20. For the purposes of section 980-5, TARP is real property situated in Australia (including a lease of land, if the land is situated in Australia). While mining, quarrying and prospecting rights are also TARP if the minerals, petroleum or quarry materials are situated in Australia, they are excluded from this measure because they are not real property that are dwellings (see paragraph 2.17 regarding dwellings).

2.29              The term ‘residential premises’ is defined in subsection 995‑1(1) of the ITAA 1997 as having the same meaning as in the GST Act. Section 195-1 of the GST Act provides that the term ‘residential premises’ means land or a building that:

       is occupied as a residence or for residential accommodation; or

       is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.

2.30              The definition specifies that land or a building that meets these requirements is residential premises regardless of the term of the occupation or intended occupation. It also specifies that the term residential premises includes a floating home.

2.31              Due to its use in the GST law, this defined term is already the subject of considerable judicial scrutiny and interpretative guidance. Broadly, land or a building will be residential premises if it provides, at minimum, shelter and basic living facilities and is either occupied by a person or designed for occupation. This is to be ascertained by an objective consideration of the character of the property — the purpose for which an entity may hold the property is not relevant.

2.32              Residential premises need only be suitable for occupation, rather than long-term occupation — they include, for example, a hotel room that may only be suitable for short term accommodation. However, it does not include things that people may occupy that are not land or a building, such as a caravan or mobile home.

2.33              The term ‘commercial residential premises’ is defined in subsection 995‑1(1) of the ITAA 1997 as having the same meaning as in the GST Act. Section 195‑1 of the GST Act defines commercial residential premises as:

       a hotel, motel, inn, hostel or boarding house;

       premises used to provide accommodation in connection with a school;

       a ship that is mainly let out on hire in the ordinary course of a business of letting ships out on hire;

       a ship that is mainly used for entertainment or transport in the ordinary course of a business of providing ships for entertainment or transport;

       a marina at which one or more of the berths are occupied, or are to be occupied, by ships used as residences;

       a caravan park or a camping ground; or

       anything similar to residential premises described in the preceding dot points.

2.34              The definition of commercial residential premises also expressly excludes premises to the extent that they are used to provide accommodation to students in connection with an educational institution that is not a school. For further information about commercial residential premises refer to Goods and Services Tax Taxation Ruling GSTR 2012/6 — Goods and services tax: commercial residential premises.

2.35              A vacant dwelling would generally be regarded as being available to be tenanted if the property is advertised or otherwise features in relevant rental vacancy websites so it has broad exposure to potential eligible tenants and, having regard to all of the circumstances; tenants are reasonably likely to rent it. It must also not be advertised as being available for other tenants who would not be eligible tenants at the same time. For example, advertising a property for short term holiday accommodation at market rates (for ineligible tenants) at the same time it is advertised as vacant by a community housing provider would breach this rule.

2.36              A vacant dwelling would not be regarded as being available to be tenanted if it is in a state where it cannot be rented out. This would include, for example, situations where construction or extensive repairs and renovations are being undertaken where it is in a state that it is not suitable for occupation.

Property management condition

2.37              The property management condition set out in paragraph 980‑5(b) requires the tenancy of the dwelling or its availability for rent to be exclusively managed by an eligible community housing provider.

2.38              Community housing providers provide rental housing to tenants who are members of the community earning low to moderate incomes. Community housing providers may own some of the dwellings, however they also manage dwellings on behalf of investors, institutions and state and territory governments. Many community housing providers specialise in providing accommodation to particular client groups which may include disability housing, aged tenants and youth housing.

2.39              Community housing providers are regulated by the states and territories. For the purposes of section 980-5, section 980-10 defines an eligible community housing provider as an entity that is registered as a community housing provider to provide community housing services under a law of the Commonwealth, state or territory or is registered by an Australian government or government entity.

2.40              Under the definition in section 980-10, an organisation that was a community housing provider will continue to be recognised as an eligible community housing provider for a period of 90 days from when its registration as a community housing provider is cancelled by a state or territory registrar. This ensures that investors do not immediately lose access to the additional capital gains discount for the dwelling by giving them a transition period to find a new community housing provider.

2.41              The management of a tenancy generally includes being the point of contact for the property for tenants, collecting rent from the tenants, conducting property inspections, scheduling and managing the carrying out of repairs and maintenance for the dwelling, keeping of records, giving of notices to tenants on behalf of the owner (if required) and, if the dwelling is vacant, advertising it as being available for rent and arranging tenancy agreements. A dwelling is available for rent if it is advertised so it has broad exposure to potential eligible tenants and having regard to all of the circumstances, tenants are reasonably likely to rent it.

2.42              The part of the condition that the dwelling is ‘exclusively managed by a community housing provider’ requires the community housing provider to have exclusive responsibility and oversight of the management of the dwelling. However the community housing provider does not have to perform all aspects of the management of the dwelling themselves and could subcontract out any or all of the responsibilities provided they retain oversight of decisions. For example they may contract out the scheduling and carrying out of repairs and maintenance or advertising of vacant properties for rent.

Example 2.2 — Property management — direct management

ACF Community Housing is a community housing provider registered under a state law that manages the tenancy and occupancy of dwellings on behalf of owners to eligible tenants.

Eligible tenants are tenants that ACF Community Housing assesses as being eligible to live in affordable housing properties. ACF Community Housing undertakes the assessment. It applies guidelines and criteria in operation in the applicable state or territory in making eligibility decisions.

In managing the tenancy or occupancy of dwellings ACF Community Housing manages the tenancy and occupation of dwellings, deals with tenants and property owners, collects rent, undertakes property inspections, organises repairs and maintenance of properties, keeps records, gives notices to tenants for owners and advertises vacant properties for rent.

As such ACF Community Housing is exclusively managing the tenancy and occupancy of the dwellings.

Example 2.3 — Property management — outsourcing

BDG Community Housing is a community housing provider registered under a state law that manages the tenancy and occupancy of dwellings on behalf of owners to eligible tenants.

Eligible tenants are tenants that BDG Community Housing assesses as being eligible to live in affordable housing properties. BDG Community Housing undertakes the assessment applying guidelines and criteria in operation in the applicable state or territory in making eligibility decisions.

To assist it in managing the tenancy or occupancy of the dwellings BDG Community Housing contracts JKL property management agency to undertake some tenancy and occupancy related tasks, that is the managing of property repairs and maintenance and engagement with tenants and owners and advertising properties that are vacant on its behalf (with BDG Community Housing having oversight).

As BDG Community Housing has full oversight of the property management services that JKL property management agency provides, BDG Community Housing is accepted as exclusively managing the dwellings itself. Therefore BDG Community Housing satisfies the property management condition.

Providing affordable housing certification condition

2.43              Under paragraph 980-5(c), a dwelling can only be taken to be used for providing affordable housing use for a day if the community housing provider has provided an affordable housing certificate that meets the requirements set out in section 980-15. This means the certificate must state that it declares that the residential premises and property management conditions have been satisfied on that day.

2.44              Section 980-15 also requires that the affordable housing certificate must be provided in the approved form. This will allow the Commissioner to specify the information that is required to be included in affordable housing certificates and to review and update it as required. The certificate will need to state the number of days the dwelling was used to provide affordable housing in the income year.

2.45              The community housing provider must provide the affordable housing certificate to the individuals or trusts that hold an ownership interest in the property on or before the 31st day after the end of the individuals’ or trusts’ income year (31 July for most individuals and trusts).

NRAS condition

2.46              Under paragraph 980-5(d) a dwelling can only be taken to provide affordable housing for a day if no entity that has an ownership interest in the dwelling is entitled to an NRAS incentive for the NRAS year that includes that day.

2.47              The National Rental Affordability Scheme Regulations 2008 set out the benefits that can be provided to an entity under the NRAS for making a dwelling available to be used as part of the scheme. They are:

       a tax offset — as set out in the tax offset certificate provided to the approved participant in relation to the dwelling by the Secretary of the Department of Social Services; or

       a payment or other non‑cash benefit — a payment made by the Secretary of the Department of Social Services to an entity in relation to the use of that dwelling under the NRAS.

2.48              For this condition, the NRAS year is the year that begins on 1 May in which the day under consideration occurs.

MIT membership condition

2.49              The final condition in section 980-5, the MIT membership condition set out in paragraph 980-5(e), only applies if the ownership interest in the dwelling is owned by a MIT. It is satisfied if the tenant does not have an interest in the MIT that passes the non‑portfolio test (that is broadly with associates has a less than 10 per cent interest in the MIT).

2.50              Section 960‑195 provides that an interest passes the non‑portfolio test if the holding entity (in this case the tenant) holds in another entity (in this case the MIT) and the sum of the direct participation interests held by the holding entity and its associates in that other entity at that time is 10 per cent or more.

Capital gain that was distributed or attributed to them directly or through an interposed entity by a trust

2.51              A capital gain is distributed or attributed by a trust directly to an individual if the trust:

       realises that capital gain itself, that is the CGT event occurs to a CGT asset of the trust (the ownership interest in the dwelling); and

       the gain is distributed or attributed by the trust directly to the individual (with there being no intervening entity).

2.52              A capital gain is distributed or attributed by a trust through an interposed entity to an individual if a trust (the first trust):

       realises that capital gain, that is the CGT event occurs to a CGT asset of the first trust (the ownership interest in the dwelling);

       the gain is distributed or attributed by the first trust (or a subsequent trust) to another entity that is another trust or a partnership; and

       the other trust or partnership then distributes the capital gain to the individual.

2.53              A capital gain of an individual that resulted from a CGT event occurring to units in a unit trust (including a MIT) that holds affordable housing will not qualify for an additional discount capital gain for affordable housing. The capital gain may have been realised by the individual or by another entity and be distributed or attributed to the individual. However as this capital gain arose from the sale of units in a unit trust, and not from a holding by an entity in an ownership interest in a dwelling, it will not qualify as it does not satisfy this requirement.

Example 2.4 — Trust distributing capital gain to an individual through an interposed entity

BDF Unit Trust signs a contract on 5 September 2022 to sell a dwelling. The settlement of the sale of the dwelling is on 3 October 2022. It had acquired the dwelling on 1 March 2018.

The BDF Unit Trust used the dwelling to provide affordable housing for more than 1095 days (3 years) during its ownership period.

The BDF Unit Trust realised a capital gain of $200,000 from the sale of the dwelling, which was reduced to $100,000 following application of the discount capital gain of 50 per cent. The trust did not realise any other capital gains or losses during the income year.

The BDF Unit Trust distributed this capital gain in equal proportion to its unit holders, including the HLJ Trust (a discretionary trust) which received a distribution of $50,000. The HLJ Trust distributes the whole of this capital gain of $50,000 to Martin. (In doing so the HLJ Trust grossed up the distribution and re‑applied the capital gains discount.)

Martin’s capital gain has been distributed to him by a trust (BDF Unit Trust) through an interposed entity (the HLJ Trust). Martin therefore satisfies this requirement for claiming the additional 10 per cent capital gains discount for affordable housing.

Capital gains distributed by or attributed by a trust covered by the specified entities

2.54              The incentive to invest in affordable housing provided by this measure is directed at individuals, who either invest directly in affordable housing (that is they directly have an ownership interest in the property used to provide affordable housing) or through trusts, but only closely held trusts or MITs.

2.55              For investments by individuals made through other entities, the entity that realises the capital gain from a CGT event occurring to an ownership interest in the property used to provide the affordable housing and any entity through which the capital gain is distributed or attributed to the individual must be either a certain type of trust or a partnership. For this purpose these trusts must not be:

       a public unit trust (other than a MIT); or

       a superannuation fund.

[Schedule 2, item 2, subsection 115-225(3)]

2.56              Public unit trust is defined in section 102P of the ITAA 1936. Broadly, a unit trust will be a public unit trust if the units in the trust are listed for quotation in the official list of a stock exchange, offered to the public in a public offer, held by more than 50 people or where a tax‑exempt investment vehicle, such as a foreign superannuation fund, is a substantial unitholder (see subsections 102P(1) and (2) of the ITAA 1936). However, a trust will not be a public unit trust if 20 or fewer people hold a beneficial interest in 75 per cent or more of the income or property of the trust, or if other integrity rules are not satisfied (see section 102P of the ITAA 1936).

Working out the net capital gain where additional affordable housing capital gains discount applies

2.57              The additional affordable housing capital gains discount is taken into account in working out an individual’s capital gain:

       from a CGT event occurring to an ownership interest in residential premises that has been used to provide affordable housing they held, or

       that was distributed or attributed to them directly or through an interposed entity by a trust.

2.58              Section 102‑5 sets out five steps to work out the net capital gain for an income year. They are:

       Step 1 — reduce the capital gains made during the income year by the capital losses (if any) made during the income year;

       Step 2 — reduce the capital gains remaining at the end of Step 1 by any previously unapplied net capital losses from earlier income years;

       Step 3 — reduce by the discount percentage each amount of a discount capital gain remaining after Step 2;

       Step 4 — apply the small business concession to any capital gain to which they apply (if applicable);

       Step 5 — Add up the amounts of any capital gains (if any) remaining after step 4. The sum is the net capital gain for the income year.

2.59              Following the amendments made by this measure, at Step 3, the capital gain is reduced by the discount percentage. The discount percentage is the discount percentage that would ordinarily apply plus the additional affordable housing discount percentage. [Schedule 2, item 2, subsection 115‑125(4)]

2.60              The affordable housing discount percentage is equal to:

where:

Subdivision 115‑B discount percentage is the discount percentage that applies under Subdivision 115‑B.

Affordable housing days are the number of days the dwelling was used to provide affordable housing during its ownership period less the number of days when the individual receiving the affordable housing capital gains discount was a foreign or temporary resident.

Total ownership days are the number of days the dwelling was held from the time it was acquired until a CGT event occurred to it.

[Schedule 2, item 2, subsection 115‑125(5)]

2.61              The Subdivision 115‑B discount percentage is used as the basis for determining the affordable housing discount percentage as:

       the affordable housing discount percentage (before adjustment) of 10 per cent is one‑fifth of the discount capital gain percentage of 50 per cent that applies to individuals (noting that only individuals are entitled to an affordable housing capital gains discount); and

       it reduces the amount of the discount to take into account the time the individual was either a foreign resident or temporary resident for taxation purposes — this ensures consistency with the discount capital gain, removes the need to apportion separately and also takes into account the transitional arrangements that applied to this apportionment (that is not reducing the discount for foreign or temporary residence days occurring before 9 May 2012).

[Schedule 2, item 1, paragraph 115‑100(e)]

2.62              The affordable housing discount percentage must also be adjusted to ensure that a capital gains discount is only available to the extent that the property was used for affordable housing use on and after 1 January 2018. This is achieved by applying an adjustment factor calculated by dividing the affordable housing days by total days in the ownership period. However, both the denominator and numerator in this calculation exclude the number of days the individual was a foreign or temporary resident after 8 May 2012. This exclusion to the number of days applies as the period that an individual was a foreign or temporary resident is already accounted for through the use of the Subdivision 115‑B discount percentage.

2.63              As with the existing discount capital gain, the additional 10 per cent capital gains discount for affordable housing will not be available if they have a net capital loss for the income year that is the sum of their capital losses for the income year exceeds the sum of their capital gains.

Example 2.5 —Affordable housing capital gain

Erica signed a contract to purchase a dwelling that was residential premises (but not commercial residential premises) on 15 May 2018 for $600,000.

On 15 September 2024 Erica signs a contract to sell the property. She makes a gross capital gain (before any capital gains discount applies) of $140,000.

Erica was an Australian resident for taxation purposes for the whole of the ownership period for the dwelling.

Erica also realises a capital loss of $30,000 in the 2024‑25 income year and has a $10,000 carry forward capital loss from a prior income year.

Erica used the dwelling as follows during the period of time for which she owned it:

       left it vacant and undertook repairs from when she acquired it on 15 May 2018 (the acquisition date for CGT purposes) until 9 September 2018 (118 days);

       rented it out by providing affordable housing to eligible tenants through an eligible community housing provider from 10 September 2018 until 17 May 2022 (1346 days);

       rented it for rent at market value (that is not providing affordable housing) from 18 May 2022 until 1 February 2023 (260 days);

       rented it out by providing affordable housing to eligible tenants through an eligible community housing provider from 2 February 2023 until 1 August 2024 (547 days);

       vacated the property and prepared it for sale on and after 2 August 2024 through until 15 September 2024 (45 days).

Therefore Erica owned the dwelling for a total of 2,316 days of which she used it to provide affordable housing for 1,893 days.

Erica’s net capital gain for the 2024‑25 income year is calculated as follows:

Step 1 — reduce the capital gains made during the income year by the capital losses (if any) made during the income year

Erica’s capital gain from Step 1 is $110,000, being the $140,000 capital gain less the capital loss of $30,000 she realised during the current income year.

Step 2 — reduce the capital gains remaining at the end of Step 1 by any previously unapplied net capital losses from earlier income years

Erica’s capital gain from Step 2 is $100,000, being the $110,000 capital gain at the end of Step 1 less the prior year capital loss of $10,000.

Step 3 — reduce by the discount percentage each amount of a discount capital gain remaining after Step 2

For the purpose of Step 3 the discount percentage is equal to the sum of the Subdivision 115‑B discount capital gain percentage plus the affordable housing capital gains discount percentage.

Erica’s Subdivision 115-B discount capital gains discount percentage is equal to 50 per cent (Erica was an individual and she was a resident of Australia for the whole of the ownership period).

The affordable housing discount capital gain percentage is equal to:

The discount percentage is equal to the sum of the Subdivision 115‑B discount capital gain percentage and the affordable housing capital gains discount percentage that is 58.17 per cent (50 per cent plus 8.17 per cent).

The capital gain from Step 3 is the capital gain following step 2 reduced by the discount percentage, that is:

Step 4 — apply the small business concession to any capital gain to which they apply (if applicable)

The small business concessions do not apply to Erica’s capital gain from the sale of the investment property. Therefore Erica’s capital gain continues to be $41,830.

Step 5 — add up the amounts of any capital gains (if any) remaining after step 4 — the sum is the net capital gain for the income year

Erica’s capital gain from the sale of the investment property at the end of Step 4 is $41,830. This is also her total capital gain for the 2024‑25 income year as she has not realised any other capital gains during that year.

Example 2.6 —Affordable housing capital gain — individual is a resident for only some of the ownership period

William purchased a dwelling that was residential premises on 1 January 2015 which he used to earn rent for the whole time he owned it. William used the property to provide affordable housing from 1 January 2018 until 30 June 2023.

On 30 June 2023 William signs a contract to sell the dwelling. He makes a capital gain (before any capital gains discount) of $200,000.

William moved to the United States of America on 1 July 2022, becoming a foreign resident for taxation purposes on and from that day. Therefore William was an Australian resident for taxation purposes for 2,738 days and a foreign resident for 365 days of the 3,103 day ownership period of the dwelling.

William does not realise any other capital gains or losses in the 2022‑23 income year and does not have any prior year capital losses.

William’s net capital gain for the 2022‑23 income year is calculated as follows:

Step 1 — reduce the capital gains made during the income year by the capital losses (if any) made during the income year

William’s capital gain from Step 1 is $200,000 as he has not realised any capital losses during the 2022‑23 income year.

Step 2 — reduce the capital gains remaining at the end of Step 1 by any previously unapplied net capital losses from earlier income years

William’s capital gain from Step 2 is $200,000 as he does not have any capital losses from prior income years.

Step 3 — reduce by the discount percentage each amount of a discount capital gain remaining after Step 2

For the purpose of Step 3 the discount percentage is equal to the sum of the Subdivision 115‑B discount capital gain percentage plus the affordable housing capital gains discount percentage.

The Subdivision 115‑B discount capital gain percentage is equal to:

The affordable housing discount capital gain percentage is equal to:

 Affordable housing days and total ownership days both exclude the number of days when the individual was a foreign or temporary resident.

The discount percentage is equal to the sum of the Subdivision 115‑B discount capital gain percentage and the affordable housing capital gains discount percentage that is 49.4 per cent (44.11 per cent plus 5.29 per cent).

The capital gain from Step 3 is the capital gain following step 2 reduced by the discount percentage, that is:

Step 4 — apply the small business concession to any capital gain to which they apply (if applicable)

The small business concessions do not apply to William’s capital gain from the sale of the investment property. Therefore William’s capital gain continues to be $101,200.

Step 5 — Add up the amounts of any capital gains (if any) remaining after step 4 — the sum is the net capital gain for the income year.

William’s capital gain from the sale of the investment property at the end of Step 4 is $101,200. This is also his total capital gain for the 2022‑23 income year as he has not realised any other capital gains during that year.

Reporting requirements for community housing providers

2.64              Under section 396-55 in Schedule 1 to the TAA 1953, community housing providers that issue affordable housing certificates must provide an annual report notifying the Commissioner in the approved form of the details of all certifications that they provide during an income year, including in relation to this measure (unless the Commissioner notifies that it is not required). Notification for an income year must be provided to the Commissioner on or before 31 days following the end of the relevant income year or within such further time that the Commissioner allows.

Disclosure of information to state registrars about community housing providers

2.65              The confidentiality of taxpayer information provisions in section 355-25 of Schedule 1 to the TAA 1953 make it an offence for a taxation officer to disclose tax information that identifies any entity, or is reasonably capable of being used to identify any entity, except in specified circumstances.

2.66              Community housing providers are regulated at the state and territory government level. The Commissioner is permitted under table items 9 and 10 of the subsection 355-65(8) of Schedule 1 to the TAA 1953 to disclose to the state and territory community housing registrars information about community housing providers for the purpose of the registrars determining whether they should be, or should continue to be, registered. The Commissioner can inform the relevant state or territory registrar about information concerning a community housing provider registered with it if the Commissioner has information suggesting that community housing provider should no longer be registered.

Application and transitional provisions

2.67              These amendments to provide an additional CGT discount applies to CGT events occurring on and after 1 January 2018 for affordable housing provided on and after that day. Although this change is retrospective in application, the additional CGT discount provides a benefit to taxpayers and does not disadvantage any taxpayers. [Schedule 2, item 3]

2.68              Schedule 2 to the Primary Bill commences on the first day of the next quarter following the day of Royal Assent. [Clause 2]

 


Chapter 3         
Near-new dwelling interests

Outline of chapter

3.1                  On 24 June 2017 amendments were made to the Foreign Acquisitions and Takeovers Regulation 2015. As part of these amendments a near-new dwelling exemption certificate was introduced. 

3.2                  The introduction of the near-new dwelling exemption certificate creates flexibility for property developers and enables them to sell near‑new dwellings (dwellings that have previously been subject to a failed settlement) to foreign persons under the Foreign Acquisitions and Takeovers Act 1975.

3.3                  These exemption certificates broadly mirror the new dwelling exemption certificates that are available to developers under section 57 of the Foreign Acquisitions and Takeovers Act 1975.

3.4                  Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near‑new Dwelling Interests) Bill 2019 create a reconciliation mechanism to ensure that where a near-new dwelling is sold by a developer to a foreign person, the developer provides a reconciliation payment in respect of that sale.

Context of amendments

3.5                  Consistent with the process for payment under a new dwelling exemption certificate, these amendments introduce a reconciliation payment for the near-new dwelling exemption certificate by which developers pay additional fees for each near‑new dwelling that was sold to a foreign person by the developer under the exemption certificate.

3.6                  This ensures equivalent treatment as that given under the new dwelling exemption certificate, which allows property developers to sell new dwellings to foreign persons, paying a reconciliation fee for each sale under the exemption certificate.

3.7                  Property developers are unable to sell a near-new dwelling to a foreign person under their new dwelling exemption certificate.

3.8                  Prior to the introduction of a near-new dwelling exemption certificate, a foreign person had to submit an individual application for approval to purchase the near-new dwelling.

3.9                  Practically, issues arose when a developer managed to exchange contracts with a person in respect of a new dwelling, but then the sale of the new dwelling did not reach settlement. Such dwellings were considered to have been sold, and therefore unable to be sold under a new dwelling exemption certificate, even though they had not changed ownership and were still able to be seen as new.

3.10              On 24 June 2017, near-new dwelling exemption certificates were introduced for developers to allow them to sell a near-new dwelling (a dwelling that had not reached settlement under a previous contract of sale) in the same way as they sell new dwellings.

Summary of new law

3.11              These amendments create a reconciliation mechanism to require developers to make six monthly payments to the Treasurer (or his or her delegate, currently the Commissioner of Taxation) under the Foreign Acquisitions and Takeovers Fees Imposition Act 2015

Comparison of key features of new law and current law

New law

Current law

The new law will replicate existing requirements for developers to make reconciliation payments for new dwellings they sell to foreign persons under a new dwelling exemption certificate. Developers who sell a near-new dwelling to a foreign person under a near-new dwelling exemption certificate will be required to make a reconciliation payment for each sale of a near-new dwelling to a foreign person.

Six monthly fees are payable by developers who sell a new dwelling to a foreign person under a new dwelling exemption certificate obtained under section 57 of the Foreign Acquisitions and Takeovers Act 1975.

The current provision doesn’t extend to cover developer sales of near-new dwellings to foreign persons under near-new dwelling exemption certificates.

 

Detailed explanation of new law

3.12              Reconciliation payments are a necessary mechanism to ensure that developers pay the same fee as would be payable if a foreign person directly applied to the Foreign Investment Review Board for the acquisition. Without reconciliation payments, foreign persons would be able to acquire dwellings without the Commissioner of Taxation receiving any additional fees with respect to those individual applications. Fees would only be incurred with respect to the application for the exemption certificate.

3.13              To create a reconciliation payment applying to sales of dwellings made under a near-new dwelling exemption certificate, new definitions have been added to the Foreign Acquisitions and Takeovers Act 1975 including a definition of near-new dwelling acquisition, near‑new dwelling interest and residential land (near-new dwelling interests) certificate. [Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, items 1 and 10, section 4 and paragraph 115C(3)(b) of the Foreign Acquisitions and Takeovers Act 1975]

3.14              Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 also inserts a new definition at subsection 113(4A) of the Foreign Acquisitions and Takeovers Act 1975 to define near-new dwelling acquisition. A near-new dwelling acquisition is, for the purposes of the foreign investment regime, any acquisition covered by a residential land (near-new dwelling interests) certificate provided to a developer. [Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, item 9, subsection 113(4A) of the Foreign Acquisitions and Takeovers Act 1975]

3.15              The Foreign Acquisitions and Takeovers Act 1975 is amended to establish the near-new dwelling exemption certificate reconciliation payment for developers. As a result of these changes, a developer will remit their near‑new dwelling fees every six months. [Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, items 2 to 8, section 113 of the Foreign Acquisitions and Takeovers Act 1975]

3.16              If a developer receives the near-new dwelling exemption certificate after this legislation is enacted then the first reconciliation fee is payable at the end of the six month period after they received the near‑new exemption certificate. The first reconciliation fee will include any fees payable from sales made by a developer under a near-new dwelling exemption certificate within that six month period.

3.17              If a developer received the near-new dwelling exemption certificate before this legislation was enacted then the developer will pay the first reconciliation fee at their first reporting date after 30 days of the commencement of this legislation. The first reconciliation fee will include any fees payable from sales made by the developer under a near-new dwelling exemption certificate since the certificate was obtained. [Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, items 11 and 12]

3.18              For subsequent reconciliation payments, developers are required to pay the reconciliation fee for sales of residential land under near-new dwelling exemption certificates on a six monthly basis. [Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, item 5, subsection 113(2A) of the Foreign Acquisitions and Takeovers Act 1975]

Example 3.1 

Pablo is a property developer who has just completed an apartment complex on the Gold Coast. Pablo understands that his apartments may attract the interest of foreign investors so he obtains a new dwelling exemption certificate and a near-new dwelling exemption certificate on 1 August 2017.

Pablo makes a number of successful sales to foreign persons under the new dwelling exemption certificate. However, one of the sales fails to reach settlement and the dwelling is not sold.

Pablo finds another purchaser for the apartment, Wendy who is a foreign person under the Foreign Acquisitions and Takeovers Act 1975. Pablo is able to sell the dwelling to Wendy under a near-new dwelling exemption certificate.

Pablo and Wendy settle the sale of the apartment on 31 December 2017. Pablo is required to pay the Commissioner of Taxation (as the Treasurer’s delegate) the reconciliation fee related to this sale on the first six monthly reporting period that falls at least 30 days after this legislation is enacted.

Consequential amendments

3.19              Consequential amendments are made by the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near-new Dwelling Interests) Bill 2019 to the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 in order to impose the amount of the fee payable by developers. [Schedule 1 to the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near-new Dwelling Interests) Bill 2019, item 4, subsections 6(5) and 6(6) of the Foreign Acquisitions and Takeovers Fees Imposition Act 2015]

3.20              Editorial amendments are made to the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 as a result of these changes. [Schedule 1 to the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near-new Dwelling Interests) Bill 2019, items 1, 2, and 3, section 6 (heading), subsection 6(1) and subsection 6(1) after note 2, of the Foreign Acquisitions and Takeovers Fees Imposition Act 2015]

Application and transitional provisions

3.21              Amendments to the Foreign Acquisitions and Takeovers Act 1975 apply from 1 July 2017. [Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, item 11]

3.22              Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 establishes a transitional period to cover acquisitions made under near-new dwelling exemption certificates that were given to a developer after 1 July 2017 and before this legislation was enacted. The transitional provisions enable a developer to make a reconciliation payment at the end of the first reporting period that falls at least 30 days after the legislation was enacted. [Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, item 12]

3.23              For subsequent reconciliation payments, they must be made six monthly. [Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019, item 5, subsection 113(2A) of the Foreign Acquisitions and Takeovers Act 1975]

3.24              Amendments to the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 apply from 1 July 2017 so that any sales of near-new dwellings made pursuant to a near-new dwelling exemption certificate are subject to a reconciliation payment by the developer who sold the near‑new dwelling. [Schedule 1 to the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near-new Dwelling Interests) Bill 2019, items 5 and 6]

3.25              The amendments to both the Foreign Acquisitions and Takeovers Act 1975 and the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 are retrospectively applied from 1 July 2017 to align with the introduction of the near-new dwelling exemption certificate, as it was always the intention to apply a reconciliation fee for each sale of a near-new dwelling to a foreign person. 

3.26              The retrospective application of this measure is consistent with the announcement of the near-new dwelling exemption certificate in the 2017-18 Budget announcement. Any adverse impact is expected to be minor, given the retrospective application was included in the Explanatory Statement that accompanied the regulations that introduced the near-new dwelling exemption certificate.

3.27              Page 5 of the Explanatory Statement of the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining) Regulations 2017 (which introduced the near-new dwelling exemption certificate) made it clear that a reconciliation payment would apply for each near‑new dwelling sold to a foreign person by the developer.

3.28              Transitional provisions apply for the first reconciliation payment for near-new dwelling exemption certificates given before this legislation was enacted. For these near-new dwelling exemption certificates, the transitional reconciliation fee period is the first reporting date that falls 30 days after the legislation commences. A fee is payable by a developer for each sale of a dwelling under the near-new dwelling exemption certificate within that period. [Schedule 1 to the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near-new Dwelling Interests) Bill 2019, item 6]


Chapter 4         
Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Capital gains tax changes for foreign residents

4.1                  Schedule 1 to the Primary Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

4.2                  This Schedule amends the ITAA 1997 to:

       remove the entitlement to the CGT main residence exemption for foreign residents; and

       modify the foreign resident CGT regime to clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from TARP, the principal asset test is applied on an associate inclusive basis.

Human rights implications

4.3                  This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

4.4                  This Schedule is compatible with human rights as it does not raise any human rights issues.

Additional capital gains discount for affordable housing

4.5                  Schedule 2 to the Primary Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

4.6                  Schedule 2 to the Primary Bill amends the ITAA 1997 to provide an additional affordable housing capital gains discount of up to 10 per cent at the time a CGT event occurs to an ownership interest in residential premises that has been used to provide affordable housing.

Human rights implications

4.7                  This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in the definition of human rights in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

4.8                  Of the human rights and freedoms recognised or declared in the international instruments listed in the definition of human rights at section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, this Schedule engages the right to an adequate standard of living, including housing, as referred to in Article 11.1 of the International Covenant on Economic, Social and Cultural Rights.

4.9                  Article 11.1 of the International Covenant on Economic, Social and Cultural Rights states that everyone has the right to ‘an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions’ and that ‘appropriate steps’ be taken to ‘ensure the realization of this right’.

4.10              Under the additional capital gains discount for affordable housing measure, an additional incentive is introduced for taxpayers who hold and maintain affordable rental housing assets in Australia which are managed by registered Community Housing Providers. This will incentivise these investors by allowing them to retain an increased amount of the capital gains they realise from their investments that are leased to members of the community earning low to moderate incomes, at rental rates set according to state and territory housing policies. As such, this Schedule is designed to increase the volume of affordable housing that is available in the market, reducing the likelihood that community members on lower incomes will experience homelessness and housing hardship.

4.11              This Schedule introduce a framework for empowering individual and institutional investors to increase their level of private investment in affordable rental accommodation by adjusting the existing concessional taxation treatment of capital gains. These measures are therefore compatible with and enhance the right to an adequate standard of living including housing.

4.12              Article 27 of the Convention on the Rights of the Child also recognises ‘the right of every child to a standard of living adequate for the child's physical, mental, spiritual, moral and social development’.  The Article also states that ‘States Parties, in accordance with national conditions and within their means, shall take appropriate measures to assist parents and others responsible for the child to implement this right and shall in case of need provide material assistance and support programmes, particularly with regard to nutrition, clothing and housing’.

4.13              By incentivising greater investment in affordable housing for prospective tenants on low to moderate incomes, the Primary Bill is compatible with children’s rights to an adequate standard of living. The Primary Bill will help ensure children within households at risk of homelessness are at lower risk of being without a home.

4.14              Tax concessions of this kind are in line with the guidance issued by the UN Committee on Economic Social and Cultural Rights regarding the right to an adequate standard of living, with respect to housing.

Conclusion

4.15              This Schedule is compatible with human rights as it does not raise any human rights issues.

Near-new dwelling exemption certificates

4.16                   Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near‑new Dwelling Interests) Bill 2019 are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

4.17                   Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near‑new Dwelling Interests) Bill 2019 establish a reconciliation payment mechanism for developers who sell residential property to foreign persons under the Foreign Acquisitions and Takeovers Act 1975.

4.18                   A sale of a near-new dwelling under a near-new dwelling exemption certificate will give rise to an obligation on a developer to make a payment to the Treasurer (or his or her delegate) of the amount of the fee that would have been payable by the foreign person under the Foreign Acquisitions and Takeovers Act 1975, the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining) Regulations 2017 had the foreign person obtained a foreign investment approval themselves.

4.19                   The Schedule does not impose any additional fees on foreign persons and creates greater flexibility for a foreign person to purchase a near-new dwelling from a developer.

Human rights implications

4.20                   Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near‑new Dwelling Interests) Bill 2019 engage the right to freedom from discrimination.

4.21                   Article 26 of the ICCPR recognises that all persons are equal before the law and are entitled without discrimination to the equal protection of the law. Article 26 further provides that ‘the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as national origin.

4.22                   However, the Human Rights Committee has recognised that ‘not every differentiation of treatment will constitute discrimination, if the criteria for such differentiation are reasonable and objective and if the aim is to achieve a purpose which is legitimate under the Covenant’.[2]

4.23                   The Schedule also generally engages the rights protected by the International Convention on the Elimination of All Forms of Racial Discrimination. Paragraph 1 of Article 1 of International Convention on the Elimination of All Forms of Racial Discrimination defines the term ‘racial discrimination’ to mean ‘any distinction, exclusion, restriction or preference based on race, colour descent, or national or ethnic origin which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural, or any other field of public life’.

4.24                   Under Article 2(a)(a) of the International Convention on the Elimination of All Forms of Racial Discrimination, [E]ach State Party undertakes to engage in no act or practice of racial discrimination against persons, groups of persons or institutions and to ensure that all public authorities and public institutions, national and local shall act in conformity with this obligation’. Under Article 5 of International Convention on the Elimination of All Forms of Racial Discrimination States Parties ‘undertake to prohibit and eliminate racial discrimination in all its forms and to guarantee the right of everyone, without distinction as to …national …origin, to equality before the law’ in the enjoyment of civil, political, economic, social and cultural rights, including the ‘right to own property alone as well as in association with others’.

4.25                   Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near‑new Dwelling Interests) Bill 2019 engage these human rights as they apply based on the citizenship of the investor. The Schedule interacts with provisions in the Foreign Acquisitions and Takeovers Act 1975 to determine whether or not an investor is subject to Australia’s foreign investment framework.

4.26                   The underlying principle of Australia’s foreign investment framework is that foreign investment in Australia is welcome where it is in the national interest. The objective of the framework is to provide a predictable and welcoming environment for foreign investors while giving the Treasurer the power to review certain investments to ensure that investment is not contrary to the national interest.

4.27                   While Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near‑new Dwelling Interests) Bill 2019 only affect individuals who are citizens of countries other than Australia, in the context of Australia’s foreign investment framework there is no less restrictive way of achieving the framework’s objectives. Accordingly those limitations are reasonable, necessary and proportionate.

Conclusion

4.28              Schedule 3 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Near‑new Dwelling Interests) Bill 2019 are compatible with human rights because to the extent that they may limit human rights, those limitations are reasonable, necessary and proportionate.



[1] This includes a beneficiary of the special disability trust and a beneficiary under the deceased estate.

[2] General Comment No 18: Non-discrimination at [13].