NEW TAX WILL SLUG FOREIGN PROPERTY BUYERS
Wednesday May 20th, 2015
Foreigners buying houses in Victoria will be slugged with a $330-million tax, under a radical state budget plan to force international investors to pay "their fair share".
Under Labor's highly controversial move, foreign nationals - many from China - will pay a new tax equivalent to 3 per cent of the purchase price of houses, raising $279 million over four years.
That means a Chinese national buying an $800,000 property will pay an extra $24,000, in addition to about $43,000 in stamp duty charges.
Foreign housing investors will also pay an extra 0.5 per cent in land tax from 2016 on new and existing properties, raising $53.5 million over four years.
Permanent Australian residents and New Zealand citizens are exempt from the new taxes.
Treasurer Tim Pallas said the surcharges were "modest" and would force foreigners to contribute to services and infrastructure.
"It is inherently unfair on Victorians for foreign purchasers to take the gains of owning property in Victoria - through the services and infrastructure that Victorians pay for over an extended period of time - without contributing their fair share," Mr Pallas said.
"Amenity in and around Melbourne is important and it is why people are so keen to live here. If you own a property in the area then you should contribute accordingly, and these modest charges go some way to redressing that balance."
To justify the tax increase, the Andrews government will highlight soaring demand from foreigners for new residential property. A survey by the National Australia Bank shows foreign demand for new properties in Victoria has leapt from about 5 per cent in 2011 to more than 30 per cent by the end of 2014.
The federal government regulates foreign investment in Australia for the Foreign Investment Review Board, with the vast bulk of foreign purchases rubber-stamped.
Critics blame foreign investment for pushing house prices beyond reach for Australians, particularly among first-home buyers. But the tax slug is also likely to be criticised as xenophobic and anti-business, with a broad consensus that foreign investment should not be discouraged.
Earlier this year the Abbott government proposed extra fees on foreign property investment, including $5000 for properties valued under $1 million and an additional $10,000 for every additional $1 million.
"Foreign investment has been very, very good for Australia but it's got to be the right foreign investment under the right circumstances, properly policed and it can't disadvantage Australian home-buyers," Prime Minister Tony Abbott said in February.
Foreigners invested $14 billion in Victorian property last financial year, up from just $5.8 billion the previous year. The Foreign Investment Review Board this week reported that the number of approvals for foreign buyers of new Australian homes more than doubled in 2014-15.
On Friday the Foreign Investment Review Board revealed that the value of foreign investment in new Australian homes tripled last financial year.
China is the biggest foreign purchaser of Australian real estate, having spent $12.4 billion in 2013-14 - up from just $5.9 billion in 2012-13.
In the case of joint owners, the surcharge will be applied to the foreign owner's share only.
Source: The Age Victoria