The new government leadership is keeping its election promise to increase foreign investment fees and penalties.
Federal Treasurer Jim Chalmers announced that foreign investment application fees will double starting 29 July, a move that will generate around $455m in Budget revenue.
“Australia welcomes foreign investment that is in Australia’s interests — foreign investment application fees ensure the cost of administering the foreign investment framework is not borne by Australians, and penalties encourage compliance with our rules,” he said.
Mr Chalmers said in making the decision, the government considered how it would put the interest of Australians and how they can benefit from foreign investment, especially in terms of housing affordability.
“Tackling housing affordability and helping more Australians into home ownership is a significant challenge and it is one this government takes seriously,” he said.
“The government has an ambitious housing reform agenda to address this challenge — changes to foreign investment fees and penalties will help to deliver this reform agenda including Help to Buy a new program to assist Australians into home ownership.”
Mr Chalmers said despite this increase, Australia will continue to be an attractive place for investment, given that the country offers strong institutions, transparent regulations and a highly‑skilled workforce.
Furthermore, he said the foreign investment fees will remain as a small share of total foreign direct investment.
Foreign persons are required to pay a fee for application made under the Foreign Acquisitions and Takeovers Act 1975. The fee for a notice or application usually depends on the value and kind of transaction being taken by foreign entities.
Wrong message to the world
Property Council of Australia chief executive Ken Morrison said the decision to increase foreign investor application fees could discourage offshore investors and hurt Australia’s economic recovery.
“The new government has rightly put a high value on Australia’s external relations in its first months in office, but this move to double foreign investor application fees sends the wrong message to the world,” he said.
"Australia needs foreign investment to power our economy, including investment in our modern office buildings, industrial parks, shopping centres, tourism facilities, student accommodation and much-needed new housing.”
Mr Morrison said this could send an opposite message to potential investors, given that fees are already higher in Australia that its competitors.
Furthermore, Mr Morrison said it is “extremely poor practice” to use a processing fee as a tax revenue source to fund other programs.
“While these steep increases were announced as part of Labor’s housing election policy, investment in agriculture, manufacturing, infrastructure, mining, commercial property, and the creation of new housing should not be taxed to pay for housing affordability schemes, no matter how worthy,” he said.
“The Property Council supports moves to tackle the challenge of housing affordability and supply but increasing costs on and deterring investment in the creation of new housing works against this goal.”
Photo by @photoholgic on Unsplash.