Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Taxation

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Tax reform to target Australia’s distorting capital gains tax and negative gearing regimes could net the government A$5.3 billion in tax revenue per year, according to a new report from the Grattan Institute.
<a href="https://grattan.edu.au/report/hot-property/" target="_blank">The report</a> recommends reducing the capital gains tax discount for individuals and trusts to 25 percent, and phasing in limits to negative gearing over 10 years.
“The case for reform is extremely strong and we do not think that this is likely to lead to a material crash in the housing market,” said the report’s author John Daley.
Daley and report co-author Danielle Wood have modelled the impact of their recommendation on house prices, rents and the rate of new housing development, estimating house prices would be 2 percent lower than otherwise.
Under their suggested tax changes people would no longer be able to write off losses from passive investments like housing against unrelated wage income.
“The only developed country we have found that lets you deduct the costs of interest and allows you to deduct it from your labour income apart from us is New Zealand,” Daley said.
Curtin Law School Associate Professor Helen Hodgson said the proposals were well balanced, based on sound evidence, and would improve the efficiency and fairness of the tax system.
She said the challenge was to claw back concessions without creating further distortions. “In that respect the Grattan Institute recommendations go further than those proposed by the Australian Labor Party.
“The ALP proposals allow existing negatively geared properties to remain deductible. This would have a lock in effect similar to the pre-CGT exemption from capital gains tax. Borrowers would be reluctant to sell their property and reinvest in other, potentially more productive, forms of investment.
The Labor Party proposal would reduce the capital gains tax discount to 25 percent and restrict negative gearing to new properties only.
Daley said this approach was likely to create a new distortion in the housing market.
“Essentially those new houses will be higher priced than the older houses and so you’ll get a distortion as investors disproportionately show up to the auctions for new housing and owner-occupiers disproportionately show up to the auctions for old housing. I’m not sure why we’d want to encourage that.”
Prime Minister Malcolm Turnbull has argued Labor’s proposal would deliver <a href="https://theconversation.com/negative-gearing-changes-wont-drive-all-investors-from-the-housing-market-heres-why-55505">“</a>massive shocks” to the residential housing market, removing all investors. Finance Minister Mathias Cormann has said it would drive down the value of established properties, and push up the cost of rental accommodation.
But Daley said given new housing supply was significantly restricted by planning rules rather than inadequate returns, it was unlikely there would be any material impact on supply or rents.
“As Commonwealth Bank CEO Ian Narev, who sits on a loan book of $400 billion has said, what keeps him awake at night is interest rates and unemployment rates, not negative gearing.”
Data from the Australia Tax Office shows negative gearing is more popular among taxpayers on higher incomes, and the Grattan Institute argues it largely benefits the wealthy.
<h4><a href="/images/2016/04/26/image-20160422-26970-mc5e3t.png" target="_blank">Click to enlarge</a></h4>
<img src="/images/2016/04/26/image-20160422-26970-mc5e3t.png" alt="">
<h4>
Taxable income is income after deductions, including rental loss deductions. ATO/Grattan Institute, Author provided
</h4>
Reforming the system would result in more funds instead flowing into equities, businesses and bank deposits.
“The current regime pushes people into property, it encourages them into much higher leverage than they would have otherwise, and that increases the volatility of the housing market and the vulnerability of the financial system,” Daley said.
 
Charis Palmer is deputy business editor, The Conversation, and can be contacted <a href="https://theconversation.com/au/team#charis-palmer" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Negative gearing windbacks could deliver $5.3bn a year: Grattan Institute

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The negative gearing debate is back to haunt Labor again, with The Australian newspaper reporting that the party stuck with its policy of limiting negative gearing to new homes despite opposition Treasury spokesman Chris Bowen being warned last year that it could hurt house prices and hit economic growth. 
Accounting and financial advice firm Bongiorno &amp; Partners last year secretly commissioned BIS Shrapnel to analyse the effect of limiting negative gearing to new houses.
It communicated its findings to Bowen’s staff and then Labor ­financial services spokesman Bernie Ripoll, according to a <a href="https://www.theaustralian.com.au/national-affairs/treasury/labor-ignored-property-negative-gearing-warnings/news-story/3fb63715d3f6ddd3e0798c22c65b6ab3" target="_blank">report in The Australian</a>. 
BIS Shrapnel’s report — which found limiting negative gearing to new houses could lead to lower house prices, rent rises of up to 10 percent, cost the budget more than it saved and cause unemployment to rise — sparked a political furore when it was publicly released last month.
The identity of the firm that commissioned the report was not released at the time, prompting Bowen to claim it was by “an anonymous vested interest”.
In attacking the document, Labor did not reveal it had received the advice last year from Bongiorno &amp; Partners while it was developing its negative gearing policy.
“Whoever’s commissioned it, they know who they are, but then they’ve put it out on the newspaper anonymously, you’ve got to have the courage of your convictions when you’re in these policy debates,’’ Bowen told ABC Radio National on March 3. He claimed that “whoever paid for it” should get their money back.
The report was intended to be an economic document rather than a political document to inform policy development on the negative gearing issue, The Australian said.
Bongiorno &amp; Partners is the same firm that commissioned research in 1983 as then Labor treasurer Paul Keating considered disallowing negative gearing. The report was ignored and negative gearing was abolished in 1985. In 1987 the then Labor government reinstated negative gearing.
Both Staff working for Bowen were briefed last July on the findings, while Ripoll was sent the report after a meeting with Tony Bongiorno, a partner from the accounting firm, at the ALP national conference last July.
After the report was publicly released last month, Labor seized on its finding that neither rents nor dwelling prices displayed any notable change of behaviour or deviation from trend during 1985-87 during Keating’s abolition of negative gearing. But Bowen dismissed its warnings that it could push down housing prices and increase rents.
“It is a poor excuse for analysis,’’ Bowen said on March 3. “It was commissioned by an anonymous vested interest who won’t even put their name to it. I mean that’s how much faith they have in it. And whoever paid for it she (sic) would get their money back because it is an atrocious piece of political propaganda, it is not analysis. It does not bear any scrutiny.’’
“From the start, media reporting of this BIS ‘analysis’ should have included a discussion of who commissioned it. Failure to do so is irresponsible.”
Labor plans to limit negative gearing to new dwellings from July 1, next year with existing investments grandfathered. After that date existing houses and share income could be offset against investment income but not against wages and salary income.
It also proposed halving the capital gains tax discount on assets held for more than 12 months to 25 per cent.
Property Observer earlier reported how Labor's policy and the government's seeming abandonment of any change, at least for the time being, could trigger diverse consequences. 
Like the balloon effect: squeeze a balloon in one place, and it inflates elsewhere, some vendors might bring their sales forward while others will bring their purchasing forward. Other owner occupiers and investors will delay.
It will be much more about the future value of people’s houses given Labor’s plans and the Government's seeming abandonment of any changes. 
It seeks to restrict the use of negative gearing in the property market to new homes, and to also halve the discount applied to capital gains tax.
Property Observer had also reported on BIS Shrapnel's report, Economic Impact of Limiting the Tax Deductibility of Negatively Geared Residential Investment Properties which said changes to the current negative gearing setup would go well beyond any saving of the income tax concession, to a multitude of unintended consequences.
It suggested new home building will shrink by around 4% nationally, or 7,200 dwellings a year and GDP would shrink by around $19 billion per annum on average, or 1 percent of Australia’s $190 trillion annual income.
The BIS Shrapnel report assumed the change was restricted to limiting negative gearing to new houses and assumed a start date of July 1, this year. It did not factor in the capital gains tax change.
It predicted higher rents would push 70,000 households into “rental stress’’, where they are paying out more than 30 per cent of their incomes on housing costs.
Median rents of $510 a week would need to rise by $73 a week in Sydney to provide an investor who had lost the benefits of negative gearing with an equivalent return.
Melbourne’s median rent of $370 would have to rise $56, Brisbane’s ($375) by $32, Adelaide’s ($280) by $29, Perth’s ($415) by $30, Canberra’s ($375) by $28, Hobart’s ($280) by $10 and Darwin’s ($465) by $20.
BIS Shrapnel found limiting negative gearing would result in “a short-run correction in real prices due to lower investor demand”.
“However, it will result in higher rents than would be expected with negative gearing,’’ the report said. “Landlords will require higher yields to compensate for the lost negative gearing concessions.”
The report said it was unlikely prices would fall enough to restore rental yields to compensate for lost negative gearing concessions. But a fall in prices would reduce the feasibility of development, causing construction to fall and rental supply to dry up.
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jonathanchancellor-7SQnKwU6yx

Labor ignored warning of economic impact in its negative gearing structure: The Australian

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GUEST OBSERVER
On 6 April 2016 the ATO released a document relating to its view of what is “arms-length” terms when a self-managed superannuation fund (SMSF) borrows from a related party of the fund.   
The release of these guidelines is welcomed in that it provides details of the ATO’s current view of how these arrangements can be structured. Questions have been raised by the SMSF industry in relation to related party loans for a number of years, and this document will assist the industry with an indication of the ATO’s view.
The guidelines provide safe harbours for loan arrangements for the purchase of real property or stock exchange listed shares or units. In providing these guidelines the ATO has expressed the view in relation to the following components of the loan including - 
·        minimum interest rate to be charged; 
·        fixed or variable interest rate terms; 
·        the term of the loan; 
·        the maximum loan to value ratio; 
·        the security to be provided; 
·        the ability for personal guarantees to be provided; 
·        frequency of repayments; and 
·        the type of agreement required. 
In assessing compliance with the above, the ATO is taking a practical approach in allowing SMSF trustees until 30 June 2016 to get their affairs in order with any loans from related parties. 
As such, any SMSF that has borrowed from a related party of the fund should review the arrangements before 30 June 2016 to ascertain if there is any impact on their current borrowing arrangements.
The ATO has also stated in the guidelines that arrangements outside of the safe harbours may be acceptable. However, in the event of the ATO reviewing the arrangements the onus will be on the trustees to “demonstrate this by maintaining evidence that shows their particular arrangement is established and maintained on terms that replicate the terms of a commercial loan available in the same circumstances.” 
The key issue for SMSFs is to review their current arrangements to see if they fit within the safe harbour provided by the ATO.  If they don’t, they should review their ability to fit within the safe harbour or consider their options by either, documenting why the arrangement is commercial, refinancing or winding up the arrangement.
Brad Eppingstall is director, of RSM Australia and can be contacted <a href="https://www.rsm.global/australia/" target="_blank">here</a>.
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ATO’s announcement on Self-Managed Superannuation Funds borrowing from related parties

Open letter to Bill Shorten - don’t touch negative gearing or the capital gains tax: Gavin McPherson

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Dear Margaret,
I bought an investment property in 2010 and was rented for 3 years before my family moved in. We are still residing at the said property.
My question is: If I sell the property, will I pay capital gains tax? I have read that if you bought an investment property but lived in it within the first six years, you are exempted.
Can you please explain this further?
Thanks a lot.
Maria
 
Hi Maria,
Capital Gains tax is very misunderstood, and the 6- year exemption even more so.  Many think, as do you, that you can live in a property sometime in that first 6 years to stop capital gains tax from accruing.  Others believe that you only have to move into an investment property for a while before you sell it in order to render it free from capital gains tax.
The tax office is not about to  let you off that easily!  Here are some important basics to know about Capital Gains tax: 
1.       Your own home is capital gains tax free as long as you are living in it.
2.       If you move out of your family home and rent it out, you can have a capital gains tax exemption for up to 6 years from the day you move out.  The conditions for this are that you don’t have another property which becomes your principal place of residence (as you can only have one exemption at a time) and you either move back into it, or sell it within that six years. This might apply if you moved elsewhere and rented with the intention of moving back some day.
3.       If your absence is longer than the 6 years you will have only a partial exemption for the six years.
4.       A property bought for the purposes of earning an income accrues capital gains tax from the moment you buy it.
5.       If you move into the property and it becomes your principal place of residence, then you still have a pro-rated capital gains tax liability for the time that it was a rental.  The purchase price will be your cost base, and the gain will be established from the sale price, and then pro- rated for days rented/days not rented. There are a range of adjustments which can be made to these figures, but they are many and you should check with your accountant to find out what they are. 
Moving into a former investment property cannot wipe your capital gains tax obligations in any circumstance. Equally if you move out of a family home and buy another one to live in, you must decide which property you want your principal place of residence exemption on – the former home or the new home.  If it is the former home, the new home you live in will attract CGT.  There are additional rules, such as the 6 month overlap rule – but this is where it gets complex and where advice from an accountant is paramount.
 
Have a property question?         <a href="mailto:news@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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What's my capital gains tax on an investment property? Ask Margaret

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CoreLogic RP Data undertook a thorough analysis when the Australian Tax Office (ATO) released the taxations statistics for the 2010/11 financial year. 
The statistics showed that over the year there were 1,811,174 individuals that owned a rental property. This was out of 9,416,002 individuals that have a taxable income and 12,637,623 individuals that lodged a tax return.
The data indicates that 14.3 percent of individuals that lodged a tax return owned investment properties while a greater 19.2 percent of individuals that reported a taxable income owned investment properties. This indicates that despite the fact 1,811,174 individuals own investment properties, the vast majority of Australians don’t invest in residential property.
Of the 1,811,174 individuals that reported to the ATO as having an investment property, 1,213,595 of these individuals, or two out of every three investors, were recording a loss on their rental income. The total value of these losses over the year was $13.285 billion. Obviously negative gearing of investment properties allows owners to claim a tax deduction on these costs. The average annual loss for these property investors with negatively geared properties was $10,947 or $210.50/week.
<a href="/images/2016/03/10/Individuals-rental-income-and-deductions.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Individuals-rental-income-and-deductions.jpg" alt="">
There were 597,577 individuals that made a profit from their investment property in 2010/11. The total value of this income was $5.423 billion. These investors have no losses to claim a tax deduction on and would have to pay tax on their investment property; of course they would have more money in their hand each week as a result of the positive gearing. The average annual profit earned from these positively geared investment properties was $9,075 or $174.50/week.
<a href="/images/2016/03/10/Tax-summary-of-rental-properties.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Tax-summary-of-rental-properties.jpg" alt="">
The data shows that on average, the losses made on investment properties that are negatively geared are larger than the profit on the positively geared propertied.  What negatively geared investors sometimes lose sight of is the fact that a loss is a loss. 
What I mean is that although the loss is tax deductible at the end of the financial year they have to carry the cost of that loss throughout the year at a sometimes significant cost.  For some it would undoubtedly be preferential to have that extra money on hand throughout the year rather than getting a larger tax return at the end of the financial year.
<a href="/images/2016/03/10/Net-rental-income-deductions-over-time.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Net-rental-income-deductions-over-time.jpg" alt="">
The $13.285 billion in rental losses over the 2010/11 financial year was 24.7 percent higher than the 2009/10 financial year however, it remains -0.2 percent lower than the historic high value of losses recorded over the 2007/08 financial year. 
The number of negatively geared property investors rose by 4.8 percent over the year however, the number of investors was also below the historic high of 2007/08 by -1.8 percent.
<a href="/images/2016/03/10/Individuals-interest-in-rental-property.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Individuals-interest-in-rental-property.jpg" alt="">
According to the ATO data, 72.8 percent of individuals that owned an investment property owned just one.  Meanwhile, 18.9 percent of individuals owned 2 properties while just 0.9 percent of individuals owned 6 or more.
No doubt the total value of the losses and the proportion of total investors claiming a loss on their property are quite alarming.  From an investment perspective you’d assume that it is generally preferential to make a profit than it is to carry a loss for 12 months of the year.  Where negative gearing works is when it reduces an individual’s taxable income to such an extent that there is a greater financial windfall from claiming that loss than there would be if that property made a profit. 
Of course investors using a negative gearing strategy also expect the value of their asset to rise, offsetting the shortfall. These benefits are usually more likely to accrue to those earning higher incomes and this is where you have to wonder if many investors really are benefiting from the negative gearing of their investment properties.
<a href="/images/2016/03/10/Individuals-net-rental-income-by-income-range.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/10/Individuals-net-rental-income-by-income-range.jpg" alt="">
The ATO data indicates that 72.3 percent of individuals with a loss making investment property have a taxable income of less than $80,000 a year, with 32.3 percent having a taxable income of less than $37,000 per year.
The total value of the losses for individuals earning less than $80,000 equated to $9,756.25 a year or $187.62 per week.  Assuming that they all had a taxable income of $40,000 per year, which represents the middle of the range, the $9,756.25 annually is 24.4 percent of their annual taxable income.
That is a significant proportion of their taxable income and a significant cost to the individual throughout the year just to secure a tax deduction at the end of the year.  If we assume the average income earner that has a taxable income of $51,342 owns an investment property, that investment property is costing them 21.3 percent of their taxable income throughout the year.
There have been many calls for negative gearing to be removed from residential property however, I believe it is extremely unlikely that either side of politics is likely to go down that path. 
Negative gearing of residential property saw the ATO forego $13.285 billion in taxation revenue over the 2010/11 financial year.  What it did allow for, because it is so ingrained in the psyche of those who invest in property, is for private residents to cater to demand for rental properties from those residents that don’t own their own home.  It is clear that the provision of rental accommodation is not a burden that Governments wish to bear however, one has to wonder if foregoing more than $13 billion in tax revenue is a cost that the federal Government can afford to give up.
The data also shows that many lower income earners are investing in negatively geared properties, perhaps many are doing so without understanding what, if any, the true benefits are.  The goal of investment should ultimately be to make a profit not a loss and with capital gains in housing much slower over the past five years and this trend anticipated to continue perhaps some investors should re-assess whether their current negative gearing strategy is truly working for them.
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Property 101: The negative gearing numbers

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Cabinet minister Peter Dutton has claimed Labor's negative gearing policy and its plan to cut the capital gains tax discount for investors from 50 percent to 25 percent policy would "cripple the economy".
"I think the economy will come to a shuddering halt and I think the stock market will crash and I think once people realise how dangerous Labor's economic proposal is, I think they'll be happy to see an election … and deal with it," he said.
Mr Dutton also borrowed former prime minister Tony Abbott's description last week to call Labor's negative gearing plans a "housing tax".
"It is becoming pretty clear that this election will be about Labor's taxes and their proposal to whack a tax on housing."
The Australian Financial Review noted Shadow treasurer Chris Bowen said Mr Dutton's statement was reckless and unfounded "unbecoming especially from a cabinet minister".
"After promising new 'economic leadership' and a new kind of politics, Malcolm Turnbull's team, when asked about the upcoming election, go straight to negativity and another party's policy."
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Labor's negative gearing policy will cripple the economy: Peter Dutton

Commercial Property 101: Australian investor guide: Savills

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The federal government has signalled that plans to cap the negative gearing tax benefit as part of its tax reform policy are unlikely to proceed.
When asked last night by 2GB's Money News host Ross Greenwood about negative gearing, treasurer Scott Morrison responded by saying: "You have always got to tailor your policies to the environment you're in."
"Right now we have a very special set of circumstances," he said.
"If we are going to make changes in tax then it has to be made up for by changes in the tax system elsewhere."
"The scope for that has been reduced over time and the final decisions will ultimately be in the budget."
He said that the Labor Party have put forward a policy on negative gearing which they haven't thought through.
"The PM made it clear last September he was putting that issue (negative gearing) generically back on the table to be considered.
"It had been removed before.
"He asked for it to be looked at so there's been a process of looking at that.
"But no one should draw a conclusion from that, that necessarily means the government would make changes to the negative gearing.
"They were saying the same thing about GST.
"People were asserting we were going to do something differently on that.
"We looked at it (GST) carefully, we made a considered decision and I think we made the right decision.
"You don't rush to failure on this stuff.
"We have to be careful and be patient that we get these calls right," the treasurer said which appears to clear the way for an easy assault on Labor's tax plans in the run-up to the federal election.
Senior sources have confirmed to The Australian Financial Review that while the proposal to cap negative gearing deductions at $20,000 a year had been looked at, it has been decided "we're not going to touch it".
For the policy to have raised the estimated $1 billion it was worth annually, it would have had to apply to existing investors with multiple properties. A source said it was "in our DNA not to apply tax increases retrospectively".
Treasurer Scott Morrison has previously flagged the option of a cap, describing it as targeting the "excesses" of negative gearing. He and his colleagues have stopped using that description in recent days in a strong hint that there will now be no change.
The AFR noted on Wednesday, Mr Morrison, when pressed, used the term "enthusiasms".
The decision to not proceed with changes to negative gearing leaves the government with just superannuation tax concession and tax deduction trade-offs to help fund plans to deliver a small personal income tax.
Labor says its policy – to halve the 50 per cent capital gains tax discount for investors to 25 per cent, and to limit all new negative gearing to new homes only from July 1, 2017 – will raise $32 billion over 10 years and generate an extra 25,000 construction jobs annually because of the demand for new housing.
But the government is expected on Thursday to seize on a report by property and building industry advisory group, BIS Shrapnel, which claims the opposite.
It claims Labor's negative gearing plans will increase rents by an average of 10 per cent, or $2600 a year, depress new home construction by 4 per cent and shrink gross domestic product by $19 billion a year.
BIS Shrapnel claims the plans will also lead to 175,000 fewer jobs over 10 years, shrink government tax revenues by $1.65 billion a year and put 70,000 households into rental stress.
But the Grattan Institute chief executive John Daley slammed the report as untrustworthy and implausible.
He said the findings were the product of skewed and grossly exaggerated assumptions and the report could not be trusted because BIS Shrapnel will not say who commissioned it.
You can listen to <a href="https://www.propertyobserver.com.au/https://www.2gb.com/audioplayer/160231" target="_blank">Scott Morrison's chat with Ross Greenwood here</a>.
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Treasurer Scott Morrison hints negative gearing changes are off the table

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GUEST OBSERVER
When considering changes to negative gearing, commentary about the potential to wind back negative gearing benefits on a retrospective basis is concerning.
People make medium to long term economic decisions based on the law at the time, and while some may argue the environment has changed to warrant the wind back of negative gearing benefits, doing so retrospectively and applying it to people who have already bought properties on which negative gearing benefits are claimed would be tantamount to penalising them for planning ahead and being financial responsible.
These people should not be penalised for choosing an option that would make themselves financially self-sufficient, rather than having to rely on the Government for assistance when they retire.
Shifting the goal posts by way of retrospective application is blatantly inequitable.
It could undermine the stability of the economic environment, which may have a far reaching impact on market confidence and therefore the stability of the economy.
It is akin to telling people who have been saving for years through their superannuation funds the environment has now changed and the Government will seize all superannuation benefits to balance the budget.
You simply don't tinker with people's medium to long term plans because these plans need political and economic certainty to achieve their intended outcome, which underwrites the economic future of this country.
Even if negative gearing changes are to be entertained, allowing these changes to apply retrospectively must not be an option.
Eddie Chung is tax partner, BDO and can be contacted <a href="https://www.bdo.com.au/en-au/our-people/eddie-chung" target="_blank">here</a>.
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