Land in the spotlight for regulators: recent tax and FIRB updates for property developers and investors

Housing affordability is a significant issue for many Australians, particularly young Australians who are yet to climb onto the property ladder. The deficiencies of past government policies to adequately respond with both supply and demand side policies has contributed to this problem, which has meant prices have continued to consistently increase to the advantage of existing land owners but at the detriment of those seeking to enter the property market. 

However, more recently both state and federal governments are beginning to prioritise policies to tackle housing affordability by using a variety of tools including taxes, tax concessions and exemptions and bans on foreign investment. Naturally, with an increase in policy comes further regulation. Recently three regulators have released guidance which will impact property developers and investors, particularly those operating in the residential property space. 

• New South Wales (NSW) Government Treasury released the “Treasurer’s guidelines for the reduction in land value for certain build-to-rent properties for Land Tax purposes” (NSW BTR Guidelines) on 4 December 2025;
• Australian Government Treasury released “FIRB Guidance Note 6: Residential Land” (FIRB Guidance Note 6) on 12 December 2025; and
• The Australian Taxation Office (ATO) released “Taxpayer Alert TA 2026/1- Contrived property development arrangements between related parties that defer recognition of income and exploit tax losses” (TA 2026/1) on 14 January 2026.

In this insight, we consider each of these publications and outline the potential implications for affected entities. 

Key takeaways

• NSW BTR Guidelines – the NSW Government has backflipped on its previous announcement that the onerous labour force hours requirement in the existing land tax concession for build-to-rent (BTR) projects in NSW would be removed from the newly introduced land tax concession. Instead, disappointingly, the NSW BTR Guidelines introduce effectively the same labour force hours requirement into the new land tax concession. The result is that the eligibility criteria for the two concessions – both of which are for a 50 per cent reduction in land value for land tax purposes – are essentially the same. However, because the new concession is indefinite compared to the existing concession which is time-limited to expire at the end of the 2039 land tax year, the new concession is clearly preferable. Taxpayers seeking to benefit from either of these concessions must collate the required evidence and submit a detailed exemption application to Revenue NSW.
• FIRB Guidance Note 6 – The updated FIRB Guidance Note 6 adopts a more pragmatic, commercial approach to foreign investment in residential land. It clarifies exceptions for established BTR dwellings – which now expressly includes retirement villages, assisted living or aged care facilities and student accommodation and clarifies the treatment of BTR projects, reducing approval uncertainty. Overall, the changes are intended to facilitate greater foreign capital participation in residential development – supporting the delivery of new housing stock.
• TA 2026/1 – the ATO is targeting related party property development structures where a special purpose developer entity is interposed between the landowner and a builder under a development agreement. The ATO is concerned that this enables some taxpayers to artificially defer recognition of income and exploit tax losses. The ATO intends to shortly publish a draft practical compliance guideline (PCG) which will produce more detailed guidance on the ATO’s views of such structures. Taxpayers with similar structures should review their arrangements, consider seeking early advice and stay tuned for further updates.

NSW BTR Guidelines

The NSW BTR Guidelines set out the eligibility criteria for one of two 50 per cent land tax taxable value reduction concessions on land used for BTR projects in NSW. Please refer to our earlier insight article for a summary of BTR tax concessions available across Australia.

Initially, in 2020 the NSW Government introduced a time-limited 50 per cent land tax taxable value reduction concession which expires at the end of the 2039 land tax year. In 2025, the NSW Government recognised that a time-limited exemption would have less impact on driving investment in NSW and so it introduced an indefinite 50 per cent land tax taxable value reduction concession. Eligible taxpayers can access only one concession – not both – in respect of a parcel of land.

The NSW BTR Guidelines were much anticipated because it had been announced in June 2025 in the NSW Government’s budget for the 2025-26 year that the onerous labour force hours requirement present in the existing time-limited concession would not be included in the new concession. However, disappointingly and contrary to this announcement, the NSW BTR Guidelines essentially introduce the same 10 per cent labour force hours requirement for the new indefinite concession. This means that to access the new indefinite concession, taxpayers will need to establish to the Chief Commissioner of State Revenue’s satisfaction that 10 per cent of labour force hours on the construction of BTR projects were performed by the persons who belong to the following classes of workers:

• apprentices or trainees;
• long-term unemployed workers;
• workers requiring upskilling (defined as workers who are provided with training either formal or on-the-job);
• workers with barriers to employment (such as persons with disability);
• Aboriginal and Torres Strait Island jobseekers; and
• graduates.

It seems counterintuitive to seek to encourage investment in BTR projects by providing a land tax concession while simultaneously imposing extremely onerous eligibility requirements that seek to apply social policy to encourage the employment of certain classes of workers. This mixing of social policy with housing-incentive policy was criticised in the industry when the first time-limited concession was introduced. It was viewed with relief when it was announced in the NSW Government’s June 2025 budget that this handbrake on investment would be removed. Unfortunately, this has not happened.

While the removal of the time-limit is welcome and means that the indefinite concession is clearly preferable to the time-limited concession, the NSW BTR Guidelines could have gone much further in encouraging investment in housing in NSW. As a result, taxpayers who wish to apply for the new time-limited concession will need to keep detailed records in order to enable them to submit an application for the concession once construction of the BTR development is complete. This creates an onerous record-keeping obligation on taxpayers and will also preclude some from accessing the concession if they have not kept the records or are unable to meet the requirement. This will in turn discourage investment in BTR projects in NSW given other states and jurisdictions may offer more attractive incentives for capital investment that are easier to satisfy.

FIRB Guidance Note 6 

The Australian Government Treasury released an updated FIRB Guidance Note 6: Residential Land on 12 December 2025, providing much-needed clarity and flexibility for foreign investment in established dwellings and BTR projects (Australia-wide).

The changes create a more practical regulatory environment for foreign developers acquiring land for housing developments. The expanded exceptions to the ban on established dwellings mean developers can structure transactions involving incidental dwellings or near-new stock without unnecessary hurdles. Broader recognition of BTR projects – without rigid statutory definitions or mandatory tax setting – opens new pathways for investment and streamlined approvals. Case-by-case flexibility for redevelopment projects below the 20-dwelling threshold, combined with potential fee waivers at commercial land rates, reduces costs and accelerates project timelines. 

For a summary of the changes, please see below. 

The revised policy position outlined in Guidance Note 6 improves Australia’s attractiveness as a destination for foreign capital in residential development. By reducing technical barriers around established dwellings, near‑new stock and mixed‑use sites, and by taking a more flexible approach to BTR, the changes lower transaction risk and approval uncertainty. While the reforms are unlikely, on their own, to be a silver bullet for housing affordability, they could support the delivery of new dwellings by enabling faster capital deployment, broader funding sources and more viable redevelopment pathways. 

TA 2026/1

A taxpayer alert provides a summary of the ATO’s concerns about new or emerging higher risk tax arrangements or issues under ATO risk assessment. TA 2026/1 notes that the ATO is currently reviewing certain property development arrangements between related parties involving long-term construction contracts. 

The arrangements being targeted include those where a special purpose developer entity (developer) is interposed between an entity that owns the land being developed (landowner) and another entity undertaking building and construction works on the land (builder). The developer and the landowner are under common ownership or control.

The ATO is concerned that related parties undertaking these arrangements are, in substance, undertaking a single economic activity of property development, yet have separated landownership and development activities to create an artificial mismatch between the recognition of income from the property development activity and deductions claimed for the costs of development. This could lead to the losses generated being utilised within the group such that tax on profits may be deferred.

To address these concerns, the ATO will:

• engage with taxpayers involved in these arrangements involving related parties that raise compliance risks;
• shortly publish a draft PCG outlining the ATO’s proposed compliance approach, including indicators of higher-risk arrangements and illustrative examples likely to attract scrutiny.

Taxpayers with similar arrangements to those described in TA 2026/1 should proactively review their structures and consider obtaining advice to determine whether they may need to restructure their activities in order to avoid potentially being investigated and audited by the ATO. Taxpayers should also look out for further updates, including the release of the draft PCG.