This ASX sector is the biggest 2023-24 budget winner

Which ASX sector is the biggest budget winner? In our view, it is the built-to-rent sector.

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The build to rent sector is the biggest budget winner

We think the built-to-rent sector could be the biggest innovation to the apartment living space since the creation of strata in the 1960s. The built-to-rent sector consists of apartments constructed by developers, which retain ownership of the building when it is complete.

The budget unveiled a handful of favourable changes for the sector. In particular the halving of the managed investment trust withholding tax rate for residential build-to-rent developments from 30% to 15% and the capital works tax deduction increasing from 2.5% to 4% per annum.

What is also pleasing for large developers is that apartment blocks need not all be build to rent to achieve this concession – developers need only 50 or more apartments available for rent to the general public to be eligible.

So, which stocks could benefit? Not many, because this sector is relatively new. But the company with the most exposure is Mirvac (ASX:MGR). It too is at an early stage, but overseas jurisdictions show that the concept has great potential to take off.

The biggest loser

In our view, the travel sector is the biggest budget loser. This is not because no company will be paying a higher tax bill, but because their would-be clients will be.

The government has increased the departure fees from A$60 per head to A$70 and has increased visa application fees. In particular, the visitor visa (the one most tourists use) will rise from A$150 to A$190.

Will this increase alone make a big difference? Probably not. But one could argue that in the ultra-competitive global tourism market, the government should have gone the other way.

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