NSW Treasurer Gladys Berejiklian has recently announced that from June 21st, the up-coming NSW budget will include new taxes for foreign property investors.
Foreign investors buying apartments, houses and residential land in NSW will have to pay a 4 per cent stamp duty surcharge. They will also pay an additional 0.75% in annual land tax surcharge commencing in the 2017 land tax year.
The idea behind these new measures, according to the decision-markers, is to ensure NSW’s property market continues to be an attractive destination for international investors, whilst making sure that we are able to fund vital services into the future, whilst not slowing foreign demand for NSW property.
A similar scheme has been in existence since last year in Victoria, where foreign buyers had a 3% stamp duty, however from 1st of July they will be stung with a 7% surcharge on residential stamp duty and 1.5% surcharge on land.
Queensland has also just announced new proposed taxes on foreign buyers of residential property, with a 3% charge on foreign purchases of apartments and houses from 1st October.
Despite the charges involved, the move is being cited as a positive one for NSW, with it being thought that most foreign investors will be likely to absorb the cost and proceed with the transaction despite the additional charges.
So what would this mean for the investor? For foreign developers purchasing a typical $20 million Sydney apartment site, they will be hit with an $800,000 stamp duty surcharge, while an offshore off-the-plan buyer of a typical $750,000 inner city unit will have to fork out more than $59,000 in transfer duties – which would be typically double what it would cost a local buyer.
In a further toughening of policies, it has also been 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. Plus, they will not be provided with a tax-free threshold for the land tax surcharge.
The new tax will add $1 billion to state coffers over the next four years and fund essential services across NSW.
The move has not, however, been met with unanimous applaud, with the Property Council saying that it is a
“tax grab” by state governments “prepared to play to the crowd on foreign investment and put at risk Australia’s reputation on the global stage”.
So how will this be likely to affect the foreign investor property market? Views on this are conflicting, with one partner from a Victorian Tax Accountants saying that the 3% foreign buyer surcharge last year, had already started to see foreign investors pulling out of the market, with international developers scaling back on land acquisition.
However, Treasurer Gladys Berejiklian believes the experience in Victoria has demonstrated that the measures have not had an adverse impact on the property market; and the new tax will add $1 billion to state coffers over the next four years and fund essential services across NSW.
