Leading business advisory firm Moore Stephens today issued a stern warning that Australia’s outbound thin capitalisation rules are creating a major disincentive for Australian property trusts to acquire property owning entities overseas.
Mr Stephen O’Flynn, Chairman of Moore Stephens Property Group, said that Australian tax reform “had a way to go”. He acknowledged that while Australia’s Real Estate Investment Trusts (REIT) legislation is world class and the government has undertaken significant international tax changes to make our system more competitive, further steps should to be taken.

“The outbound thin capitalisation rules need to be amended to allow interest deductions to be claimed by Australian Property Trusts against any Australian taxable income derived as a result of their investment in foreign controlled property owning companies,” Mr O’Flynn said.

Presenting a keynote address at the Australian Property Funds Industry Forum on the Sunshine Coast today, Mr O’Flynn said that “much of the burden created by the Australian tax system could be eased.

“This can be achieved by Australian property funds acquiring new European properties that have a high plant component (compared to the total cost of the properties) and by maximising the debt to the European property owning entities.”

He acknowledged it was easier said than done to find properties with these characteristics in a particularly competitive market.
Mr O’Flynn said that every European country has its own unique tax system and so each investor must consider every property acquisition on its merits.

“There is no one size fits all approach to acquiring property in Europe. When acquiring the shares in a European property owning company, countries with merger legislation may allow post acquisition structuring to enable investors to obtain an uplift in the depreciable value of older properties,” Mr O’Flynn said.

The Moore Stephens Property Group was formed to leverage the extensive industry expertise and skills of the six Moore Stephens member firms. Approximately 15 per cent of Moore Stephens clients are directly involved in the property industry.

About Moore Stephens Australia
Moore Stephens Australia is a national network of six independent firms of business advisors and chartered accountants, with offices in all mainland capital cities. Each firm is also an independent member of Moore Stephens International Limited, a global network which has upwards of 500 offices in more than 90 countries.

For further information:
Joel Lentin - General Manager, Moore Stephens Australia
Telephone: (03) 9614 4444 Mobile: 0412 105 945
Email: jlentin@moorestephens.com.au