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New tax on foreign property buyers

South Perth housing from Kings Park

Dcoetzee

South Perth housing from Kings Park

Vesh Arumugam, Reporter

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In the September Budget WA Treasurer Ben Wyatt announced a new tax to be imposed on foreign property buyers in WA.

The extra 4% tax is set to repair part of the $4.2bn Western Australian state net debt by 2021. The new tax surcharge is an addition to the existing 5.15% duty payable surcharge.

The new tax is expected to create $49m in revenue by 2020-21, which is approximately $16.3m each year.

The new tax will be applied to all houses, buildings, companies and lands in WA from 1 January 2019.

According to a News Corp Australia report, Chinese investors are the main foreign local property buyers in WA. Investors from Korea and Japan come in as second and third highest real estate buyers in WA.

CPA accountant and tax agent Justin Coppin said the new tax might not benefit the state economy in the long-run.

“I think the state budget is in negative territory and the Government has to do something to increase the revenue base, but sometimes they do things with a short time benefit.

“You can raise 4% from the property sale, but it has a long-term detriment on the performance of the economy, especially when we’re looking at foreign people coming into the economy, which is what is required to make the economy respondent,” he said.

According to National Australia Bank’s latest residential property survey, one in every four homes in WA are owned by foreign buyers.

Shadow Minister for Commerce Michael Mischin told ECU Daily that he is not in favour of the new tax.

“I do not support the proposed tax. It will discourage foreign investment at a time when our economy, and in particular our property and housing sector, is trying to recover. Investment in purchasing property and developing it maintains our building and construction industry and creates job opportunities.

“Deterring such investment, at a time when local investors are not prepared to fill the gap, is counter-productive and demonstrates how the union-backed McGowan Labor Government favours popularist prejudice over economic understanding,” he said.

Ameetha Mercy Alagan is a foreign property investor in WA. She is from Malaysia, has lived in Perth for the past decade and is passionate about investing in local properties, such as small houses and units in Perth.

Ms Alagan said that, as a small investor, it is hard to buy a house in WA with the tax imposed.

“Being a foreign investor, investing in Australia, this 4% extra tax, it works against me.”

Ms Alagan, who is expecting to expand her family next year, finds the imminent change is burdening her.

“I’m married and I’m looking to have kids next year, investing in another property and looking at buying a house, that 4% increase is really significant for me considering the expenses that I would incur from having kids,” she said.

Property law expert Rupert Johnson said it requires a long judiciary process to enact the new tax into a law.

“The surcharge will require some legislative enactment, and that could be either, perhaps as an amendment to the Duties Act or it could involve the passage of a new separate legislation.”

Tax expert Salome Iswariah said the new tax has both positive and negative impacts to the foreign buyers.

“It’s got two situations to it. You have the boost to the state revenue, which is going to help our economy at the end of the day, but then again you might have low income earning foreigners who invested in smaller properties, they might cut down and they might not invest in anything at all, so that might be the drawback.”

Mr Coppin said the new tax is a way of revenue raising from a group with little political influence.

“Because foreign buyers don’t vote, they can increase this tax and have no impact,” he said.

Real Estate Institute of WA President Hayden Groves said that he was surprised with the additional tax on property buyers. He said that the Labor government should have consulted with the industry before proposing it in order to gain an understanding of the repercussions a tax like this would have on activity levels in an already soft market.

“Politicians view property taxes as an easy way to raise funds to pay for something else without proper regard for the impacts on the community. Introducing an additional 4% residential property tax on foreign buyers is another example of politicians bleeding property for political point scoring,” he said.

Mr Wyatt said that even though it was a hard decision to make, the extra tax surcharge will benefit the state economy in the long-run: “I understand fully they’re not going to appreciate it.”

 

 

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New tax on foreign property buyers