Revised MIT Legislation removes Residential Property prohibition

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Yesterday, the Government released draft legislation titled “Removing tax loopholes”, that include measures that address the tax leakage of foreign investment into residential and rural property.

The previous draft legislation released by the Government on 14th September 2017 had proposed that Managed Investment Trusts (“MITs”) be prohibited from investing in residential properties if they were not considered for affordable housing purposes. As the DomaCom Fund is structured as an MIT, this cast significant concerns over the viability of the DomaCom business model for the past 10 months.

We are pleased that the revised legislation has removed this prohibition and instead has addressed the potential tax leakage by foreign investment into residential properties by adjusting the withholding tax regime and ensuring that Foreign Investors pay their fair share of tax. DomaCom can now proceed with its business model of allowing investors to fractionally invest in residential properties across Australia.

DomaCom believes that the proposed legislation is a robust solution that ensures the appropriate tax is paid by foreign investors whilst still allowing MIT’s to be rightfully utilised for the investment into residential rental stock whether that be for affordable or non-affordable housing.

This will clearly help address the well documented shortage of affordable residential rental properties by increasing supply of rental properties.

The proposed legislation has now entered into a two week exposure period during which DomaCom is working with its tax advisers to ensure all aspects of the detailed draft legislation are reviewed, analysed and any submissions, if necessary, are made to Treasury.

DomaCom has a leading well structured and regulated MIT and with the removal of this significant loophole can now be utilised to the maximum benefit of its investor base.

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