Withholding Tax ‘carrot’ for new green buildings welcomed but the ‘stick’ hurts existing green leaders

The Green Building Council of Australia (GBCA) has applauded the Gillard government for its commitment to Australia’s green building future, with the announcement that a smaller increase to the rate of Withholding Tax (WHT) will be applied to new building projects achieving 5 Star or 6 Star Green Star ratings.

The new standard rate of WHT is being set at 15%, doubled from the previous level of 7.5%. However, green building projects constructed after 1 July 2012 and achieving 5 Star and 6 Star Green Star certification will be eligible for a reduced rate of 10%.

“We are pleased with the Australian Government’s decision to embed Green Star into the new Withholding Tax rate structure. This represents a massive incentive for foreign investment into new projects that achieve an ‘Australian Excellence’ rating of 5 Star Green Star or a ‘World Leadership’ rating of 6 Star Green Star,” said Robin Mellon, the GBCA’s Executive Director of Advocacy.

“The Australian Greens are to be congratulated for their role in pushing for such benefits for new green projects.”

However, the GBCA is still disappointed with the increases to the rate of WHT: “The change to the standard rate of Withholding Tax is deplorable where it penalises Australia’s existing green buildings,” Mellon said.

“There are currently several hundred 5 Star and 6 Star Green Star-rated buildings across the country that have demonstrated excellent levels of efficiency, productivity and sustainability. Doubling the rate of tax on foreign investment into these projects - which are Australia’s existing green building leaders - is severely impacting their chances of being seen as attractive, competitive assets.”

The WHT is charged on income paid from managed schemes to foreign investors, many of which fund large infrastructure and property projects in Australia, including low-carbon, renewable energy, and sustainable building, community and infrastructure projects.

“To encourage Australia’s green building future it is essential that government balances the ‘stick’ of regulation, such as the Commercial Building Disclosure scheme which relates to energy efficiency in commercial buildings, with the ‘carrot’ of incentives, such as this one,” Mellon said.

“Our existing buildings - including world-leading projects such as Sydney’s 1 Bligh Street, Melbourne’s The Gauge and Perth’s 2 Victoria Avenue - should be just as attractive to foreign investors as brand new projects.

“This incentive is an important step in encouraging overseas investment into Australia’s new sustainable commercial office developments, retail centres and non-residential accommodation projects. But we urge the Australian Government to include other high-performance developments, such as education and healthcare facilities, and to reconsider the application of the new standard rate of WHT to our existing green building projects. Australia’s sustainable building leaders should not be punished by such retrospective penalties,” Mellon concluded.