Foreign property investors in New South Wales will soon face a 4% stamps duty surcharge and a 0.75% land tax surcharge on residential property purchased and owned in the state.
NSW Treasurer Gladys Berejiklian confirmed the foreign investor surcharges will be included in the state’s next budget announced on 21 June.
The measures are expected to raise more than $1 billion over four years for “essential services across NSW”.
“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,” Treasurer Berejiklian said.
The 4% stamp duty surcharge will come into effect immediately on budget day, 21 June, whilst the 0.75% land tax surcharge will commence in the 2017 land tax year.
New South Wales isn’t the only state to raise taxes for foreign investors. From July, Victoria will have a 7% foreign investor surcharge on residential stamp duty and 1.5% surcharge on some land tax.
“The Victorian experience has demonstrated that the measures have not had an adverse impact on the property market,” Berejiklian said.
However, the Property Council of Australia has labelled the tax surcharges as a "cash grab" that will "do nothing to fix housing supply or improve affordability".
"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," Glenn Byres, the Property Council's chief of policy and housing said.
“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.
"As the Prime Minister says, if you want less of something, you tax it more."
According to Byres, offshore investors account for about 15-20% of pre-sales in our capital cities, which 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."
The Treasurer 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 foreign persons will not be provided with a tax-free threshold for the land tax surcharge.