Boarding Houses - Loophole (as big as a bus)

Came across this article in the SMH on boarding houses being approved by councils as low cost housing in NSW under SEPP (Affordable Rental Housing) 2009 but then being leased out as designer furnished studios for up to $500/wk

There is little a council can do about it (apparently). Unlike SEPP 5 (housing for the Over 55's) which must be registered on title, there is no such control over these boarding houses.

Most LEPs will allow boarding houses with council consent in residential areas, they will not allow units in the same areas. Rental returns are much greater, insurance (TBA), management fees comparable, land tax - EXEMPT*.

* exemption is limited to premises which meet the conditions specified annually in the Land Tax ruling annually (rent charged, provision of meals etc).

 

I first reaction was "what is the loophole exactly?".

If that's what you're allowed to build, and that's what the market rent is - then is it really the developer's fault?

 

@thatbum - approved as affordable housing however offered as niche/designer housing. Approval has been sought under the SEPP but not provided to the public as a product for that market.

 

Technically it is affordable
I dont think you could rent new official studio apartments in those suburbs for cheaper - though yes the boarding style ones are probably smaller

 

Boarding House accomodation requires Council approval and registrtaion under most state law. Its a GST trigger too. What you think is resi may be commercial and vice versa. Ilegal boarding is a crime in State law so take care.From a simple tax law issue boarding house acquiistion triggers GST so its complex.

Div 87 of the GST Act also complicates it. Land tax exemption is a lure but the bait is GST

 

Input taxed, so you budget to lose 1/11 of $500/wk per studio, land tax trap is that there are limits as to how much can be charged to singles or shared occupancies.

 

If you don't want the tax consessions you can charge as much as you like. If you are claiming the tax consessions you will need to demonstrate to the ATO you're charging cheap rent.

It's not a loophole, this has always been the case, if you double dip it's tax fraud. If someone wants that kind of heat for a few grand a year, go for it lol!