The doubling of the tax rate applicable to international Managed Investment Trusts (MITs), with no consultation nor warning and – it would appear – based upon miss-guided thinking, not just flies in the face of the plan to make Australia “the hub of finance in Asia”, but the sudden move places Australia on the list of countries with significant Sovereign Risk.
As a result Australia is no longer considered so transparent.
Since the budget, we have seen prudent comments from Property Council of Australia and reports from the likes of Business Council of Australia. These confirm what intuition tells us – that 7.5% of something is better than 15% of nothing.
Over the last few years, Napier & Blakeley has provided Due Diligence on about $10 billion of property investment transactions for international investors.
Since the budget announcement, we have spoken with many of these clients as well as others throughout Asia and all of them have stated that increased cost is one thing – especially when it’s retrospective – but the increased uncertainty about Australia’s investment landscape is their biggest concern. They have said that the MIT debacle has them considering alternative investment destination.
We are also aware that industry bodies such as The Asia Pacific Real Estate Association based in Singapore have been asked by their significant membership investing in Australia, to investigate these changes and lobby on their members behalf.”
Immediately following the Budget, a $1 billion investment prospect was whipped off the table, whilst since then perhaps another $1b has gone cold.
Unfortunately, the MIT withholding rate increases from 7.5% to 15% has won Senate approval, with a concession for new energy efficient buildings.
From 1 July 2012, Managed Investment Trusts that only hold newly constructed energy efficient commercial buildings will be eligible for a 10% tax rate (reduced from 15%).
The concession will be available in relation to office buildings that have obtained a 5-star Green Star rating or a predicted 5.5 star NABERS rating, and retail centres and non-residential accommodation that meet equivalent standards.
This green washing of poor policy is also unfortunate. It appears that the government is missing or has forgotten the point that the single most cost effective way in Australia to reduce energy use is in retrofitting existing buildings.
If any green coating were to be applied, it should have been in this sphere, not new build, especially as most (all) international / institutional grade investment properties will be 5 star anyway.
Incentive for retrofitting is still needed as many building owners don’t appear to ‘get’ the fact that an investment that saves you money is basically the same as an investment that gives you a positive return. Many options for sustainable retrofits provide a 20% – 33% – 50% returns on investment.
Retrofitting has the other benefit of providing for employment quickly in a depressed market, whereas new builds have long lead times.
We believe that it is in the interests of ALL of the property sector to ensure we fight for clarity and transparency and thus we ask Wayne Swan to ……..
“Keep your mitts off the MITs!”
Contact
Transaction & Asset Advisory
Rob Howells – 03 9915 6300 – rhowells@napierblakeley.com
Alastair Walker – 02 9299 1899 – awalker@napierblakeley.com
Sustainable Property Solutions
Peter Frith – 03 9915 6300 – pfrith@napierblakeley.com
Development Advisory & Quantity Surveying
Craig Smith – 03 9915 6300 – csmith@napierblakeley.com
Peter Hammond – 02 9299 1899 – phammond@napierblakeley.com
Paul Cosker – 07 3221 8255 – pcosker@napierblakeley.com
Property Depreciation & Insurance
John Mathew – 03 9915 6300 – jmathew@napierblakeley.com
Paul Mazoletti – 07 3221 8255 – pmazoletti@napierblakeley.com
As a result Australia is no longer considered so transparent.
Since the budget, we have seen prudent comments from Property Council of Australia and reports from the likes of Business Council of Australia. These confirm what intuition tells us – that 7.5% of something is better than 15% of nothing.
Over the last few years, Napier & Blakeley has provided Due Diligence on about $10 billion of property investment transactions for international investors.
Since the budget announcement, we have spoken with many of these clients as well as others throughout Asia and all of them have stated that increased cost is one thing – especially when it’s retrospective – but the increased uncertainty about Australia’s investment landscape is their biggest concern. They have said that the MIT debacle has them considering alternative investment destination.
We are also aware that industry bodies such as The Asia Pacific Real Estate Association based in Singapore have been asked by their significant membership investing in Australia, to investigate these changes and lobby on their members behalf.”
Immediately following the Budget, a $1 billion investment prospect was whipped off the table, whilst since then perhaps another $1b has gone cold.
Unfortunately, the MIT withholding rate increases from 7.5% to 15% has won Senate approval, with a concession for new energy efficient buildings.
From 1 July 2012, Managed Investment Trusts that only hold newly constructed energy efficient commercial buildings will be eligible for a 10% tax rate (reduced from 15%).
The concession will be available in relation to office buildings that have obtained a 5-star Green Star rating or a predicted 5.5 star NABERS rating, and retail centres and non-residential accommodation that meet equivalent standards.
This green washing of poor policy is also unfortunate. It appears that the government is missing or has forgotten the point that the single most cost effective way in Australia to reduce energy use is in retrofitting existing buildings.
If any green coating were to be applied, it should have been in this sphere, not new build, especially as most (all) international / institutional grade investment properties will be 5 star anyway.
Incentive for retrofitting is still needed as many building owners don’t appear to ‘get’ the fact that an investment that saves you money is basically the same as an investment that gives you a positive return. Many options for sustainable retrofits provide a 20% – 33% – 50% returns on investment.
Retrofitting has the other benefit of providing for employment quickly in a depressed market, whereas new builds have long lead times.
We believe that it is in the interests of ALL of the property sector to ensure we fight for clarity and transparency and thus we ask Wayne Swan to ……..
“Keep your mitts off the MITs!”
Contact
Transaction & Asset Advisory
Rob Howells – 03 9915 6300 – rhowells@napierblakeley.com
Alastair Walker – 02 9299 1899 – awalker@napierblakeley.com
Sustainable Property Solutions
Peter Frith – 03 9915 6300 – pfrith@napierblakeley.com
Development Advisory & Quantity Surveying
Craig Smith – 03 9915 6300 – csmith@napierblakeley.com
Peter Hammond – 02 9299 1899 – phammond@napierblakeley.com
Paul Cosker – 07 3221 8255 – pcosker@napierblakeley.com
Property Depreciation & Insurance
John Mathew – 03 9915 6300 – jmathew@napierblakeley.com
Paul Mazoletti – 07 3221 8255 – pmazoletti@napierblakeley.com