Mixed news on foreign investor tax exemptions

While the Queensland Government’s exemption framework for its tax on foreign investment is welcome news, in New South Wales the tax on housing supply is starting to bite. 

In the last 15 months, NSW, Victoria and Queensland have introduced extra taxes on foreign buyers of residential property.

From 1 October, foreign-owned developers will be required to pay three per cent extra tax in Queensland. However, last week the Palaszczuk Government announced that exemptions would be available for projects that receive ‘significant development’ status.

“To pass this test the development by a foreign entity must include a minimum of residential lots,” Treasurer Curtis Pitt said.

Exemptions may also be granted to major projects in regional areas that can demonstrate “significant economic benefits”.

This news has been welcomed by the Property Council of Australia, and executive director Chris Mountford says Queensland-based development companies who are considered foreign-owned under the legislation “will be relieved to see they will now be able to seek relief from the new tax”.

“These companies contribute to the Queensland economy, create jobs for Queenslanders and add significantly to the state’s housing stock.

“While their foreign customers will still have to pay the tax, the impact of the new surcharge on the economy and the property industry will be reduced by these changes.”

Meanwhile, in New South Wales, the industry is calling for the Baird Government to drop its tax on foreign investment.

A four per cent stamp duty surcharge for foreign buyers came into force on 21 June, with another 0.75 per cent annual land tax to be applied next year.

Over the past few weeks, the Property Council has held talks with NSW government ministers, including Treasurer Gladys Berejiklian, warning that the tax will hit both end product housing and the land bought for development.

The Property Council’s NSW executive director, Jane Fitzgerald, says the government has effectively put a new tax on housing supply.

This will lead to two outcomes, Fitzgerald says.

“Projects will simply not proceed, or if they do, the four per cent tax will be passed on to the end-buyer which will actually worsen the housing affordability problem.

“Foreign capital underpins between 15 and 25 per cent of housing construction in New South Wales. As this new tax starts to bite it will stop many houses ever being built and the ones that are will be more expensive,” Ms Fitzgerald concludes.