Ralph review is given the thumbs up

The Government’s response to the Ralph Report looks good for the property industry.

In particular, tax preferred income will still flow to beneficiaries in its current form.

This means property trusts will be classified as collective investment vehicles rather than companies – a big win against long odds following intense lobbying.

The definition of CIVs needs some work before the new system is introduced in July 2001 but is favourable for listed trusts, syndicates and wholesale funds.

The story is even better because corporate taxes will fall to 34 per cent next year and 30 per cent the year after with capital gains tax for individuals halving and reduced for superannuation funds.

When combined with the proposed tax cuts and reduced indirect taxes, the entire package is positive for three reasons:

• There will be more money in the pockets of business and individuals

• Property vehicles are an attractive home for that money

• The demand for space is more likely to increase where businesses are more profitable.

The only snag for property trusts is the Federal Treasury still believe that trusts that provide business services are active investment vehicles and should be taxed as companies.

The Property Council is now discussing these technical issues with Treasury in order to consolidate the positive progress that has been made at the policy level.

Treasury’s efforts to scrap the 25/40 year building allowance have been stopped. Building structure write-offs will now be tipped into a new wasting assets regime based on effective life.

There are many more technical issues associated with the thousand plus pages of Ralph’s recommendations, accompanying legislation and the government’s response.

All in all, however, the government has moved light years away from recommendations that would have harmed the property industry.

• Joe Lenzo is executive director of the WA Branch of the Property Council of Australia.

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