One long-time builder says the traditional single-home knockdown-rebuild model is no longer viable under the new rules, even though it once underpinned a lucrative part of the industry. Dual-occupancy development, once a solid niche, suddenly looks like the main way smaller players can still access powerful tax breaks.
The policy changes announced on Tuesday specifically target the way residential investors claim tax concessions, channelling the benefits towards newly created housing stock. Investors can still access negative gearing and the 50% capital gains tax deduction, but only if they end up with more dwellings than previously existed on the block they redevelop.
Single-dwelling knockdown-rebuilds no longer qualify, because they do not increase the number of homes available, even if the new house is brand-new. Under the new regime, a site that originally held one home must finish with at least two, such as a duplex, small townhouse cluster or similar multi-unit project, to keep those concessions.
For one Melbourne construction firm, the shift flips its business model on its head. Single-home knockdowns and rebuilds had been a core profitable line until the tax changes effectively closed that pathway for investors.
Dual-occupancy work, which once made up around 10% of its jobs, had almost disappeared in recent years as construction costs surged after the COVID-19 pandemic and squeezed project feasibility. Those projects now stand to regain appeal because they are one of the few ways smaller investors can grow the number of dwellings on a site without stepping into large-scale apartment development.
The builder is openly hoping that demand for dual-occupancy projects rebounds under the new tax settings.
