Scott Ludlam (WA, Australian Greens) Share this | Hansard source

I also rise to speak briefly on the Tax Laws Amendment (2011 Measures No. 5) Bill 2011, mostly on schedule 3, after first acknowledging the huge amount of time and energy that Senator Milne has put into pursuing this particular perverse incentive in our tax system. By the end of that very long road, it was really difficult to find anybody who would speak in favour of it, so it is good that the government has taken this opportunity to finally just kick it over. There are many others there.

Schedule 3 of this bill relates to the National Rental Affordability Scheme, NRAS, which was designed to stimulate the construction and supply of affordable rental dwellings. It is a good initiative. It is not a homelessness initiative as such but is designed to increase the supply of affordable housing for key workers and low- to middle-income earners, and to encourage investment on a large scale, an institutional scale—that is, to get investors back into the business of funding affordable housing rather than the kinds of property investments which investors, large and small, have been making over the last couple of decades.

The measure that we are debating this evening will provide certainty to investors participating collectively in the NRAS. Schedule 3 of this bill amends the Income Tax Assessment Act 1997 to provide a legislative solution to allow NRAS consortia to receive their full entitlement to the NRAS incentive. These incentives were designed to be received tax-free by participants in the scheme, and this bill extends this to joint-venture operations, as we thought the government had originally intended.

The introduction of this bill has been a long time coming. It is a great relief for NRAS investors and for the sector at large. The issue has been in play since late 2009 when the ATO made an interpretation that prohibited investors from receiving the NRAS tax offset if they leased their properties to an NRAS entitled entity for sublease to eligible tenants. Treasurer Swan responded in January of last year with an administrative solution that resolved the tax issues for joint ventures until regulatory and legislative amendments could be introduced later that year to effect a permanent fix. Investors and people wanting to get into the sector to help provide affordable housing have been waiting until this evening for that instrument and for that permanent fix to come about.

We have been very concerned to learn of several instances where projects were in jeopardy of falling over—and we know of one instance where an investor did in fact withdraw—because investors and financiers felt that, in the absence of legislation or further government assurances, the Australian Taxation Office might not grant NRAS joint-venture investors the full offset benefit on their incentives.

There are two examples that I will briefly to touch on tonight to demonstrate the effect of these delays: one from right here in Canberra and one from a bit further afield in Queensland. Canberra, we know, is now one of the most stretched housing markets in Australia. Rental houses here are the most expensive of any capital city after Darwin with a median price of $500 a week for a house and $425 a week for a unit. CHC is a not-for-profit development company that delivers affordable properties for both sale and rent to the ACT community. CHC Affordable Housing Canberra has a number of NRAS properties, so they were involved in the scheme. They have developed 95 per cent of their allocations—that is, they are tenanted—and have another 34 incentives in progress in a new Canberra greenfield suburb. In the suburb of Holt, they have two NRAS developments: one with 24 units and a smaller one with eight. In both cases they own the properties and will retain them, and they are able to rent them at less than 80 per cent of market rent that is required for NRAS—they are actually renting them at just under 75 per cent of market rent. That is the scheme operating as the government intended. That was what it was designed to do.

One of the larger projects was Edge, a 104-unit development that combined both rental and owner-occupied options and included lower cost affordable homeownership properties. Seventy-six of these were to be NRAS dwellings but the legal structure was not in place at the time to provide the assurance that the NRAS incentive in this joint venture would actually get passed on to them. Without that proper structure in place it was deemed too difficult administratively and too expensive to pursue a private ruling from the ATO to provide the assurances to the investors that they were needing. Instead, 67 incentives were transferred to another project and the units were sold to investors for rental in the private market. This bill, which we are very happy to support tonight, will prevent that from happening again. We believe and understand that CHC Affordable Housing will revisit the model now that that certainty is in place in future projects.

In Queensland the very tight housing market was made disastrously worse when the floods affected three-quarters of the state, at least 70 towns and over 200,000 people. One large development project in Queensland, which has been pending, specifically awaiting the passage of this legislation, I understand will now go ahead. It is a project to build 186 units, and 45 of them will be NRAS properties. It is worth $84 million. So far, half of the NRAS residences have been sold off the plan on the condition that this legislation gets up. So we are very pleased tonight to support this legislation, which provides the necessary assurances to finalise that project.

For investors in these examples in Canberra and Queensland this bill cannot come soon enough. After a two-year wait we are all very relieved to finally have the certainty. We also welcome the government's assurances that the benefits of the tax offset will be retrospective.

There are a number of other changes that could be made to the way that NRAS is implemented that would further promote the scheme, including streamlining the applica­tion and assessment process. The last time I raised this issue in budget estimates the people processing the incentives through the government's approval process were bas­ically being swamped. Although the scheme has been criticised for moving too slowly, at the moment the people doing the assessment work cannot keep up. This is certainly one thing we think could be improved. There are huge delays between the time of application and announcement.

You cannot obviously talk about providing certainty and ending the delays that NRAS applicants are facing without talking about the bigger picture, so what of NRAS beyond the 50,000 target? The Australian Greens are strong supporters of NRAS. We would like to see a commitment to a second round of 50,000 incentives past 2015, when the first 50,000 incentives allocation will be completed, because that really will provide certainty to the big institutional investors that you can get into affordable housing markets in Australia, that the return stacks up, that that can be banked on and that we will finally be increasing supply.

We know that is only a tiny part of the affordable housing picture in Australia. Senator Milne just spoke eloquently about the perverse incentives in the tax system, and that is true in housing more so than any other sector. That is something we will be pursuing later this year.

This is not the first time that the ATO has held the affordable housing sector hostage over its interpretation of what it deems to be acceptable NRAS activities. We had a long and anxious wait for the last three years on the issue of whether the provision of affordable housing through NRAS was deemed to be a charitable purpose. To me the threat by the ATO that charities could have their charitable status revoked if they were in the business of providing affordable housing through this scheme was quite perverse, and yet it has been so since 2009. People are basically participating now on the basis of goodwill. The day after the federal budget was released we finally saw the ruling come out that the provision of a rental dwelling under NRAS is deemed by legislation to be a charitable purpose. Finally people were given that certainty.

On the issue of confusing messages coming from the government, you will recall that out of left field—we certainly did not see it coming—the government's flood reconstruction package for Queensland basically swiped a third of the final funding for the National Rental Affordability Scheme. The affordable housing sector and their allies, from superannuation funds right through to people running community housing organisations, really should be congratulated for their very swift action. We were very pleased to support them and to lead the charge on giving the department time to process the applications that were already afoot and then restoring that funding after 2014. We are very proud that we achieved the goal of at least restoring the original program funding.

We want to see this continue. I remind government senators here tonight that the government's original intention was to treat NRAS as though it were a 10-year project and to double the target to 100,000 if the scheme were successful. I suspect by this time next year there will not be any further argument about whether the scheme is successful. It will be more: what happens when the 10-year scheme comes to an end? Will there be more incentives? What will happen to affordable housing when the incentives no longer apply?

We have enjoyed tracking the inception of NRAS and advocating for its success, including ways to improve it. We certainly will not give up on an announcement for another 50,000 incentives, as former housing minister Ms Plibersek promised when she introduced the scheme. We look forward to working with the government on the ways that NRAS can be used to fill the desperate gap in the three key areas where we believe the scheme currently falls short. These are obviously housing for our students, housing for our key workers in boom towns and housing for our ageing population. There is a long way to go in the housing affordability agenda, but I congratulate the government for at least bringing this scheme forward and for committing to its continuation.