In his recent column in Switzer, John McGrath explains why he believes the governments proposed foreign investment tax is ill advised.
HERE’S WHAT HE SAID:
The Federal Government’s proposal to slug foreign investors at least $5,000 just to apply to buy residential Australian real estate is very dangerous and short-sighted.
The depth of the Australian real estate market is vast and the long term economic and social value in attracting offshore investment into our market is critical, so why would we disincentivise that?
Here are the details of the proposed tax on foreign buyers, which would apply to temporary residents as well as offshore investors:
- For residential real estate proposals and rural land acquisitions, a fee of up to $5,000 would apply to properties valued under $1 million.
- Applications to purchase a property equal to, or greater than, $1 million would be subject to a fee of up to $10,000. This would then increase in increments of up to $10,000 for each additional $1 million in value.
- Property developers seeking an advanced off the plan certificate (required to enable them to sell to foreign buyers) would be levied an application fee based on the number of dwellings sold to foreign investors.
I think this is just another tax grab by the Government from the property sector. On current estimates, they’re saying it will raise more than $200 million a year.
These fees are much higher than the $1,500 fee put forward by the House of Reps Economics Committee, which was commissioned last year to do a full review of foreign ownership rules.
There’s been a lot of discussion in the media about affordability for young buyers and foreign investors allegedly squeezing out first home buyers in this country.
This just isn’t true.
We are blessed with a huge land mass with almost infinite development opportunities to accommodate everyone’s needs.
In 30 years, I’ve never met a committed first homebuyer who couldn’t find a way to get onto the property ladder.
Today, many first homebuyers are doing it by purchasing an affordable investment property first, then a home in their desired lifestyle location later.
In addition, offshore buyers are very narrow in their geographic focus.
In Sydney, the majority of foreigners buy new apartments in 10 established multicultural communities such as Hurstville, Burwood, Kensington and Chatswood. There is limited impact elsewhere.
If the Government is serious about improving affordability why not reduce the delays and crushing taxes that hit both buyers and developers?
Why does it take several years for developers to get approval for compliant developments?
Why do 25% of their costs end up wasted on delta, red tape and statutory fees?
Most developers I talk to would happily reduce their prices if they were freed up from some of the huge costs they currently have to bear.
With regard to overseas investors who act outside the rules, I’m in 100% agreement that they must be dealt with firmly as should anyone who disregards the law.
But don’t penalise the law-abiding overseas immigrants and investors who add to the energy and fabric of our culture.
Let’s not forget, all of our origins are from elsewhere.
Our multicultural society is one of our great assets.
Why send a message to the world that foreigners aren’t welcome to invest alongside us in this great country?