This article is from the Australian Property Journal archive
SUNTEC REIT, the owner of some of Australia’s prized $2 billion commercial property assets, will face a higher tax rate, more than double what it currently pays.
Suntec REIT announced that Singaporean billionaire Gordon Tang and his wife Celine Tang have acquired a 13.55% and 13.65% of stake respectively in the trust.
The couple bought the stake in the REIT as part of their takeover bid which lapsed this week after failing to achieve the 50% acceptance threshold.
And the couple’s significant interest will trigger the REIT to lose the withholding managed investment trust (MIT) tax rate for its Australian assets.
Suntec REIT owns five investments in Australia, across Adelaide, Melbourne and Sydney.
The trust owns 55 Currie Street Adelaide, which it acquired in 2019 for $148 million.
Its two Melbourne investments are Southgate Complex and the Olderfleet building at 477 Collins Street.
In Sydney the trust owns 21 Harris Street Pyrmont and 177 Pacific Highway in North Sydney.
The entire portfolio was valued at S$1.7 billion (approximately A$1.99 billion) and generating a net income of S$33.8 million per annum.
The trust enjoyed had enjoyed a concessionary withholding tax rate at 10% or 15% on distributions because previously because no individual (who is not a resident of Australia) had directly or indirectly hold, control or have the right to more than 10% of the REIT.
Due to the Tangs’ failed takeover bid, the REIT no longer qualifies for MIT treatment and will have to pay an effective Australian tax rate of 30% to 45%.
As a result, if Suntec REIT (Australia) Trust is subject to an effective Australian tax rate of 30% for the financial year ended 31 December 2024, its distribution per unit would be 6.055 cents instead of 6.192 cents. Correspondingly, the deferred tax liability balance in respect of the Australian assets will increase to 30% which would, on a pro forma basis, impact its net asset value per unit to be S$2.03 instead of S$2.05.
