Tax on foreign investment puts projects at risk 

If you aspire to be a global city like Sydney or Melbourne, you don’t give the middle finger to foreign investors, says the Property Council’s chief of policy and housing, Glenn Byres.

In its latest budget the Victorian Government’s tax on foreign investors was increased, with the stamp duty surcharge rising to seven per cent and the land tax levy to 1.5 per cent.

Now, there are signs that NSW will follow Victoria’s lead, with the Baird Government yet to rule out a possible 1.5 per cent surcharge on foreign investors buying into the residential market.

Asked about the potential move last week, NSW Treasurer Gladys Berejiklian said she wouldn’t “rule anything in or out”.

“The Andrews Government has significantly escalated its taxes on foreign investment this year, and people are taking a second look at the merits of investing in Victoria,” Byres explains.

“It is concerning that NSW may be considering a similar tax. Such a move sends a bad signal at a time when our national economy needs a boost, and when housing affordability is critical.”

Byres says Victoria’s tax is already putting projects and transactions at risk.

“People are still unclear about who will and won’t be granted exemptions in Victoria. How are partnership structures or funds from offshore investment treated under this legislation? These are the questions industry is asking – questions that government does not think through when it comes up with a populist tax.

“We are not talking just about people who buy homes, which is bad enough. Under the Victorian model, people who aspire to build homes are also taxed – which makes no sense at a time when new supply is crucial to housing affordability.”

While we wait for the NSW budget to be handed down on 21 June, there no suggestion that other states are looking to introduce a foreign investor tax.

Last year, Queensland Treasurer Curtis Pitt said his government wanted to “send out a very clear message that Queensland is open for business and that we welcome foreign property investment.”

Meanwhile, Byres says even a small levy in NSW would send an “appalling signal to the world”, particularly to Asia.

“If you aspire to be a world leading global city like Sydney, you don’t give the middle finger to foreign investors,” Byres says.

Byres says taxing foreign investment is counterproductive, because “if you turn away investment you switch off supply” without addressing the root cause of affordability.

“Governments should instead turn their minds to abolishing inefficient taxes like stamp duty and fixing our planning systems to ensure we have a steady supply of new homes. That’s the best way to ensure homes are affordable for Australians.”