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2016-2017-2018
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
TREASURY LAWS AMENDMENT (IMPROVING THE ENERGY EFFICIENCY OF
RENTAL PROPERTIES) BILL 2018
EXPLANATORY MEMORANDUM
(Circulated by authority of Senator Storer)
TREASURY LAWS AMENDMENT (IMPROVING THE ENERGY EFFICIENCY OF
RENTAL PROPERTIES) BILL 2018
OUTLINE
The Bill amends the Income Tax Assessment Act 1997 to allow landlords to claim a tax offset
of up to $2000 per year during a three year trial period for energy efficiency upgrades to
rental properties leased at $300 per week or less, which is roughly 30 per cent below national
median market rent.
The Bill is a response to the fact that low income people who rent are acutely vulnerable to
energy poverty. Low income people who rent typically reside in the most energy inefficient
homes, use the most energy inefficient appliances, and typically lack the means to upgrade
the energy performance of their home.
At the same time, our tax code perversely incentivises landlords to retain energy inefficient
rental properties. Landlords are able to claim the cost of repairs made to their rental
properties, but are unable to claim appropriately for energy efficiency upgrades that would
give significant relief to those finding energy bills unaffordable.
The Bill aims to address that disconnect by bringing the interests of landlords and renters
closer together.
The Bill will provide an incentive for landlords to undertake energy efficiency upgrades of
their rental properties. The primary desired consequence of encouraging those upgrades is to
reduce energy bills, improve comfort, and improve health outcomes for low income people
who rent.
The Bill will be reviewed by a panel comprised of experts in areas of affordable housing and
energy efficiency after a three year trial period.
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NOTES ON CLAUSES
Clause 1 - Short Title
1. Clause 1 is a formal provision specifying that the short title of the Bill may be cited as
the Treasury Laws Amendment (Improving the Energy Efficiency of Rental
Properties) Act 2018.
Clause 2 - Commencement
2. The Bill's main provisions in Schedule 1 are to commence on the day after the Act
receives the Royal Assent.
Clause 3 - Schedules
3. Clause 3 provides that legislation specified in the Schedule is amended or repealed
as is set out in the applicable items in the Schedule.
Schedule 1 - Amendments
Income Tax Assessment Act 1997
Item 1 - Section 13-1 (after table item headed "R&D")
4. Item 1 inserts the rental property energy efficiency offset into the list of tax offsets
in section 13-1 of the Act.
Item 2 - Section 67-23 (after table item 23)
5. Item 2 provides that the rental property energy efficiency offset is a tax offset
available under proposed Division 381.
6. The intention of creating this tax offset is to provide some incentive to landlords to
undertake at least some upgrades: other incentives, such as 'instant-asset-write-offs'
were deemed to not provide sufficient incentive.
Item 3 - Division 381-Rental property energy efficiency offset
7. Item 3 inserts new Division 381 to create the rental property energy efficiency
offset.
8. Proposed section 381-5 outlines that the eligibility to claim a tax offset requires
certain conditions to be met.
9. Subsection 381-5(1) requires that the dwelling in question is to be rented at $300 per
week or less, as well as requiring that measures claimed are energy efficiency
measures. The intention of combining those two conditions is for the Bill to
primarily benefit people who have low economic resources. The $300 per week
figure is consistent with 2016 data from the Australian Bureau of Statistics, which
suggests that $300 per week is roughly 30 per cent below median market value rent.
There are more sophisticated mechanisms that measure low economic resource
households, but for the purposes of this trial policy a rough guide seems appropriate.
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10. Subsection 381-5(2) specifies that the amount able to be claimed is $2000 per
eligible property, per year, for the duration of the tax offset. That amount was
arrived at to balance:
(a) cost to the budget; and
(b) incentives to the landlord.
11. It is likely the case that a higher claimable threshold would have stronger impact in
improving building energy performance; however this is deliberately a modest
measure in order to encourage and assist smooth up-take.
12. Subsection 381-5(3) provides that the offset is available to be claimed per dwelling,
not per landlord, to avoid consequences including:
(a) fewer desired properties being impacted if a landlord owned multiple eligible
properties; and
(b) multiple landlords claiming for the same property.
13. Subsection 381-5(4) specifies that in the first year of the property, no installation or
replacement of an appliance is able to be claimed. The intention is to avoid the
consequence that a more energy efficient appliance is installed, but the building
performance remains weak. This would result in limited benefit to the occupant.
14. Section 381-10 establishes what energy efficiency measures can be claimed,
including energy performance assessment tools. The assessment tools listed are
intended to be available nationally, so as to avoid preferring one state over another.
15. Section 381-15 specifies that an energy efficiency measure must meet quality
controlled industry standards, in order that:
(a) upgrades are installed with respect to climate context; and
(b) installation is performed by adequately trained and accredited
professionals, who must only use high performance and safe materials.
Item 4 - Review of Amendments
16. Item 4 inserts a requirement that, before the end of the 2021-2022 income year, there
shall be an independent review of the Bill. It is intended that the review would be
undertaken by an independent panel that comprises housing affordability and energy
efficiency experts for quality control.
17. Item 4(4), paragraph (b) notes that a copy of the report must include
recommendations in relation to other policy measures. The intention of paragraph
(b) is that those recommendations refer to at least the following, but by no means
exhaustive, list
(a) threshold level;
(b) housing stress;
(c) eligible energy performance assessment tools;
(d) eligible energy efficiency items;
(e) quality-control conditions; and
(f) alternative policy measures for improving the energy efficiency of
residential housing.
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
TREASURY LAWS AMENDMET (IMPROVING THE ENERGY EFFICIENCY OF
RENTAL PROPERTIES) BILL 2018
The Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of the Bill
The purpose of the Bill is to amend the Income Tax Assessment Act 1997 to allow landlords
to claim up to $2000 per year during the three year trial period for energy efficiency upgrades
to certain rental properties, if those rental properties are leased at $300 per week or less.
Human rights implications
The Bill supports human rights of low economic resource people to have access to
affordable, healthy and comfortable homes.
Conclusion
The Bill is compatible with and supportive of human rights as it does not raise any human
rights issues.
Senator Storer
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