Property 101: QLD foreign buyers surcharge

Property 101: QLD foreign buyers surcharge
Property 101: QLD foreign buyers surcharge

GUEST OBSERVER

It doesn’t take much to comprehend how many residential apartments are being constructed across south-east Queensland. 

There are a huge number that will be crying out for buyers over the next couple of years and, despite the fact some of these buyers are sure to be investors from either interstate or offshore, the Palaszczuk Government has introduced a 3 percent stamp duty charge for foreign buyers looking to invest in the state.

New South Wales and Victoria have both introduced the same surcharge in recent months, which gave Queensland a fantastic opportunity to stand out in the crowded Australian property market.  Had Queensland bucked the trend, foreign investment in the Sunshine State would undoubtedly have increased.  

Attractiveness is key for Queensland. The number of residential apartments set to come online over the next 12 months means the state needs a point of difference. Currently, it still imposes duty on a number of things that other states do not, which, put simply, makes it a less desirable jurisdiction to set up business. 

Instead of imposing a foreign investor surcharge, Queensland could have presented itself as one of the few jurisdictions that does not impose a foreign investor surcharge and used that to attract foreign investment, leveraging its point of difference to other states.

New South Wales set a fantastic example in its June budget, proving there are ways to counteract the introduction of this surcharge. 

Treasurer Gladys Berejiklian announced a 4 percent foreign investor surcharge on purchases of residential properties; this is a greater charge than the Palaszczuk Government’s 3 percent. 

However, Ms Berejiklian also announced the duty on transfers of business assets will be abolished. The Palaszczuk Government chose not to abolish this duty.  

This decision makes the foreign investor surcharge in New South Wales far more palatable. Even if New South Wales does see a decline in foreign investment it will be countered by the new businesses setting up shop. 

Compare that with Queensland, which has kept both charges, and the state is becoming less attractive a jurisdiction for either business or foreign investment when pitted against a state like New South Wales. This demonstrates that for businesses and investors it is really about the overall tax mix, not just changes to individual taxes. Getting the mix right is crucial to ensuring ongoing investment to drive growth.

While ’foreign investment’ can be a scary term for some to digest, the reality is it’s a completely viable and logical way to handle any oversupply in the residential property market which, based on recent advice, appears to be a real possibility.

But it’s not all doom and gloom. Queensland can take solace that regardless of any other duties or charges, it still has a lower charge for foreign investors than New South Wales’s 4 percent and Victoria’s 7 percent. This, coupled with Queensland’s more competitive house prices, should hopefully minimise the impact of the surcharge on foreign investment in Queensland.

Hung Tran is private clients partner with BDO Brisbane and Leisa Rafter is tax partner. They can be contacted here.

Tags: 
Foreign Investment Property Taxation

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