The ‘Build To Rent’ Missing Link: if the GST law was written today instead of in 2000 …?

A simple generic ‘Build to Rent project’ is where a landowner/developer:?

• Owns land?
• constructs (or sub-contracts to a builder) ‘built form’ on that land?
• the form is exclusively residential premises (strata titled or not)?
• the residential premises will be rented as residential accommodation, and?
• there’s no intention, and no attempt will be made, to sell those premises for a period of at least 5 years from when the premises are completed.?

and does not refer to more complex BTR scenarios:?

• Properties built to supply GST-free supplies of rented accommodation (eg SDA, some housing supplied by Charities, etc)?
• Commercial Residential Premises (eg short-term stay or hotel accommodation)??
• properties Built to Sell to another entity (related or not) and that other entity will rent them?

Institutional investment in large scale BTR projects were not common in 2000, but are now an essential means of increasing the much needed supply of housing and residential accommodation.?

But the current GST treatment, written in 2000, is making many at scale BTR projects not feasible. It’s arguable that if the GST was written today, in order to allow BTR at scale to be more feasible, the following might be considered.?

Instead of outright denial of GST input tax credits, change the GST law to allow BTR developers to claim full GST credits in the same manner as Build to Sell developers, removing the financial burden of the GST during the often 5 to 10 years it takes to get the built form ‘out of the ground’ and to a point where revenue start flowing.? Hence, this is simply to delay the burden of GST.?

Build to Sell developers do not bear any GST until the residences are sold, and the GST paid to Government comes out of the amounts paid by the purchasers at settlement.? BTR developers however, even with the change suggested above to allow them to claim GST input tax credits, only gain revenue as it trickles in over many future years out of the rents charged.???

There are numerous approaches the Government could take to then impose GST on residential premises, once completed, by changing the GST law so that BTR developer pays GST:??

1. Equal to the GST input tax credits claimed along the way, which is equal to the GST input tax credits now being denied under the current GST law, along the following timelines:?1.1 In full when the residential premises are completed (but there is no revenue to support that), or?1.2 out of the rents as and when received, until fully paid (but this would ‘look like’ residential rents being subject to GST), or?1.3 on a ‘proxy’ such as by instalments over the 5 years following completion to line up with the ‘5 year new residential premises’ provisions?1.4 that is, pay the same quantum of GST, but out of revenue vs during development.?
2. Or to give an incentive to BTR Developers to provide stocks of long term residential accommodation at scale, by imposing a lesser amount of GST.? For example, say 75% of the amount stated above, and still payable in same way as the above 3 timelines.? That GST could in some cases be similar to the margin scheme outcomes.???

The above are just some suggestions? that are not meant to give BTR developers a ‘free kick’ but are directed to more closely aligning the GST treatment of BTR to that applying to Build to Sell developers.? That is, to fill in the ‘missing link’ enabling feasible institutional investment in BTR at scale in 2023.???