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  • Trusts, MITs and partnerships: reporting for affordable housing

    If your trust or partnership sells a property used for affordable housing, your investors will need information to claim the extra capital gains tax (CGT) discount.

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    Who can claim the affordable housing CGT discount

    Your trust or partnership may invest in affordable housing, either:

    • directly
    • indirectly through another trust, managed investment trust (MIT) or partnership.

    If your trust or partnership, or the interposed entity, makes a discount capital gain from the sale of the property, an extra discount of up to 10% is available if the property meets the affordable housing eligibility conditions.

    Only your individual investors can claim the extra affordable housing CGT discount. The trust or partnership cannot claim this discount.

    Information to provide to investors

    To work out their additional discount, your investors will need information from you about the period the property was used for affordable housing.

    You need to provide the following information to your individual investors (or the interposed entity):

    • capital gain amount attributable to the sale of the affordable housing property
    • number of days the property was used to provide affordable housing
      • this information is in the annual affordable housing certificates sent to you by the community housing provider who managed the property
       
    • dates the investment property was used for affordable housing
      • investors will need these dates if they have to exclude any periods they were a foreign or temporary resident.
       

    How to provide the information

    As the trustee or partner, you can decide how you provide the affordable housing capital gain information to your individual investors or interposed entity.

    You may provide it through:

    • additional notes in your attribution managed investment trust member annual (AMMA) statement or the standard distribution statement (SDS)
    • a separate statement or courtesy letter
    • information on your website.

    If you are an interposed entity and receive the affordable housing information from a trustee or partner, you need to pass on the information to the individual investor.

    Example – Trust distributing capital gain to an individual

    Sunshine Coast Trust, an Attribution managed investment trust (AMIT), purchased a dwelling on 15 June 2018. The dwelling was used to provide affordable housing. Sunshine Coast Trust engaged CDE Community Housing Provider (CHP) to manage the property. CDE CHP issued annual affordable housing certificates to Sunshine Coast Trust.

    On 20 May 2022, Sunshine Coast Trust signed a contract to sell the dwelling and settlement was 25 June 2022. The ownership period was 1,436 days (15 June 2018 to 20 May 2022). The dwelling was used to provide affordable housing for the whole ownership period.

    When the dwelling was sold, Sunshine Coast Trust realised a capital gain of $150,000. This was reduced to $75,000 with the capital gain discount of 50%.

    Sunshine Coast Trust attributed a capital gain of $25,000 to an individual investor, Mary, being her share of the capital gain. Sunshine Coast Trust provided Mary with an AMMA statement showing the distribution of the $25,000 gain. They also sent a courtesy letter containing the following information about the dwelling:

    • ownership period (15 June 2018 to 20 May 2022, a total of 1,436 ownership days)
    • number of days the dwelling was used for affordable housing (1,436 days)
    • the dates the dwelling was used for affordable housing, in this case 15 June 2018 to 20 May 2022.

    Mary meets the conditions to claim the additional 10% capital gains discount for affordable housing. Mary uses the information in the courtesy letter to calculate her affordable housing discount percentage and shows the net capital gain in her individual tax return.

    End of example

     

    Example – Trust distributing capital gain to an individual through an interposed entity

    MFA Trust, an AMIT, acquired a dwelling on 1 March 2018. On 5 September 2022, they signed a contract to sell the dwelling and settlement was 5 October 2022.

    MFA Trust owned the dwelling for a total of 1,650 days and used the dwelling to provide affordable housing for the whole ownership period. MFA engaged ABC Community Housing Provider (CHP) to manage the property. ABC CHP issued annual affordable housing certificates to MFA Trust. The certificates showed the number of days the dwelling was used for affordable housing. The total of 1,650 days is more than the 1,095 days (3 years) required for an individual investor or beneficiary to be eligible to claim the affordable housing discount.

    MFA Trust had a capital gain of $200,000 from the sale of the dwelling, which was reduced to $100,000 with the capital gain discount of 50%. MFA Trust didn’t have any other capital gains or losses during the income year.

    MFA Trust attributed this capital gain in equal proportion to its unit holders. This included SMP Trust, which received an attribution of $20,000, being its share of the capital gain. MFA Trust provides SMP Trust with an AMMA statement showing the attribution of the $20,000 gain. MFA Trust also publishes the following information on their website so SMP Trust can find affordable housing details about the dwelling:

    • total number of days the dwelling was used for affordable housing (1,650 days)
    • total ownership days of the dwelling (1,650 days)
    • the start and end date the dwelling was used for affordable housing (1 March 2018 to 5 September 2022)

    SMP Trust then distributed the capital gain of $20,000 to Kevin, a beneficiary of the trust. SMP Trust advised Kevin of the capital gain distribution through a Standard Distribution Statement and provided the affordable housing information in a courtesy letter to Kevin.

    As Kevin’s capital gain has been distributed to him by a trust (MFA Trust) through an interposed entity (SMP Trust), he meets the conditions to claim the additional 10% capital gains discount for affordable housing.

    End of example
    Last modified: 11 Oct 2021QC 66950