It had been speculated that the NSW government were considering hitting foreign investors with a higher rate of land tax in the upcoming budget, but Treasurer Gladys Berejiklian has announced the tax increases will go further than that.
Berejiklian yesterday announced that from 21 June foreign buyers of residential real estate in NSW will face an additional stamp duty surcharge of 4%, while the start of the 2017 land tax year will bring 0.75% additional surcharge for foreign buyers.
The announcement means that NSW’s tax plan for foreign buyers will fall in the middle ground between that of Queensland and Victoria.
Victorian Treasurer Curtis Pitt has recently announced that foreign buyers will face a stamp duty surcharge of 7% and a land tax surcharge of 1.5%, while Queensland Treasurer Curtis Pitt last week announced a stamp duty surcharge of 3% for foreign buyers in his state.
Numerous voices have criticised those moves, claiming they could have a serious negative impact on property markets in those states, however Berejiklian believes those concerns are overblown.
“These new measures will ensure NSW’s property market continues to be an attractive destination for international investors while making sure that we are able to fund vital services into the future,” she said.
“The Victorian experience has demonstrated that the measures have not had an adverse impact on the property market.”
But while Berejiklian defended the move, Glenn Byres policy chief with the Property Council of Australia said state governments are simply milking foreign investors for revenue while damging the reputation of Australia and it’s property market.
"We've now got a race to the bottom on populist taxes that do nothing to fix housing supply or improve affordability," Byres said.
"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," he said.
Byres said the tax surcharges could severely damage housing supply as the market continues to work through restrictions on investor lending.
“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 said
"Offshore investors account for about 15 – 20% of pre-sales in our capital cities and help switch projects from concept to construction.
"This helps maintain a supply pipeline crucial to close the demand gap, lifts affordability and every new home constructed supports up to 40 jobs.”
Berejiklian also announced that foreign investors will no longer be entitled to the 12 month deferral for the payment of stamp duty for off-the-plan purchases of residential property and they will no longer be provided with a tax-free threshold for the land tax surcharge.
According to figures from the NSW Treasury, the stamp duty surcharge will deliver an additional $835 million to the government over the next four years, while the land tax surcharge will deliver a further $166 million over the same period.