The Government’s reform of taxation of stapled structures strikes a sensible balance between improving the integrity of the corporate tax system while still encouraging productive investment in Australia’s property industry.
Property Council of Australia Chief Executive Ken Morrison said the changes were a generally positive outcome that recognised the significant economic contribution that is made by Australia’s world-class managers of retail and commercial property investments.
Australia’s property stapled groups attract significant global capital which is critical to creating the world class places where we live, work and play. There are also 14.8 million Australians with direct or indirect exposure to property through their superannuation funds.
“Throughout the extensive consultation with industry on these measures, the Government importantly recognised the long-standing use of stapled structures in the property industry and noted that this was not the cause of their integrity concerns,” Mr Morrison said.
Stapled property groups combine complimentary businesses and provide their investors with the opportunity to benefit from the expertise of property asset managers in institutional commercial real estate as well as development and fund management activities.
The focus of the Government’s concern has been the misuse of stapled structures to artificially convert active income to passive income which can be eligible for potentially lower tax rates.
“We welcome measures that strengthen the integrity of the tax system and deliver equitable treatment for all investors,” Mr Morrison said.
The proposed package confirms that there will be no direct impact on stapled structures in the commercial and retail property sectors to the extent they generate rent from third parties and ensures minimal disruption to established structures.
“However, there may be some impacts for the broader property sector as well as foreign investors into these structures which we will need to consider more carefully and may require further discussion with Government,” Mr Morrison said.
“We welcome the measured and consultative approach Government has taken and look forward to continuing our engagement with Government and Treasury to progress the reform package.”
Source: Property Council of Australia