This article is from the Australian Property Journal archive
THE New South Wales government is expecting to raise over $1 billion from a new stamp duty surcharge, applicable to foreign buyers.
Treasurer Gladys Berejiklian announced that foreigners buying property in the state would pay the 4% tax from next week, and an additional 0.75% land tax from 2017.
Treasurer Berejiklian said she was confident the new charges would not dissuade foreign investors.
“We do not feel that this will in any way compromise the property market at all.
“It’s been proven successful in Victoria, we also know that Queensland is moving in this direction and we also know that most foreign investors are likely to absorb this cost and proceed with their transaction anyway,” she said.
Furthermore, foreign investors would no longer be entitled to a 12-month deferral for the payment of stamp duty for off-the-plan purchases of residential property. And Foreigners would not be given a tax-free threshold for the land tax surcharge.
Accountancy firm Pitcher Partners Sydney partner Scott McGill said the surcharges on foreign investors are a backwards step for NSW.
“Victoria has similar surcharges on absentee owners. And they’re already starting to see foreign investors pulling out of the market, with international developers scaling back on land acquisition.
“Combine that with a very tight lending market for developers and you run the real risk of restricting supply and pushing up real estate prices – which is the last thing Sydney needs,” McGill said.
“Government can’t afford to come in with a knee jerk reaction to foreign investment without considering the downstream effects.
“It’s far too simplistic to say foreign investors are making access and affordability harder for NSW residents. Higher taxes on foreign investors will not improve housing affordability, but rather it will undermine new supply coming on board,” he continued.
“Property is a hotly contested sector, but it’s still the goose that lays the golden egg as far as economic growth is concerned, especially now that the mining boom has ended.
“It’s time for government to stop killing the goose,” McGill said.
Property Council of Australia chief of policy and housing Glenn Byres said housing supply in our major capital cities is being put at risk by counter-productive taxes on foreign investment.
“We’ve now got a race to the bottom on populist taxes that do nothing to fix housing supply or improve affordability.
“Let’s call this for what it is – a cash grab from states prepared to play to the crowd on foreign investment and put at risk Australia’s reputation on the global stage.
“Mike Baird is channelling Bob Carr and the failed vendor duty – introducing a bad tax at a bad time and inflicting damage on the housing construction industry.
“We are already seeing signs that tighter lending conditions are having an effect on the market, and the trend is that approvals and commencements have passed the peak,” he added.
“You also give up any pretence of being a global city if you increase taxes on foreign investment.
“Offshore investors account for about 15 – 20% of pre-sales in our capital cities and help switch projects from concept to construction.
“If the states want to boost affordability, they would take responsibility for fixing their dysfunctional planning systems that add to the cost of new homes through red tape. “They would also remove stamp duty, the biggest barrier to home ownership, which adds up to $60,000 over the life of an average mortgage,” Byres said.
NSW joins Victoria and Queensland in introducing stamp duty surcharges to foreign buyers.
Last week, QLD introduced a 3% tax to foreigners. Treasurer Curtis Pitt said the surcharge is expected to raise $15 million in the first year and $25 million a year after that.
Recently the Victorian government raised the stamp duty from 3% to 7%, as well increased the land tax surcharge on absentee owners from 0.5% to 1.5%. The taxes are expected to raise an extra $486 million for state’s coffers over the next four years.
Australian Property Journal
