NSW hikes stamp duty for foreign investors to 8 percent
New South Wales will double its foreign investors stamp duty surcharge to 8 percent as part of premier Gladys Berejiklian’s moves to address housing affordability ahead of the budget.
The annual land tax surcharge on foreign home owners will also increase to 2 percent from the existing 0.75 per cent.
Berejiklian is expected to announce more details after a cabinet meeting on Thursday, The Australian Financial Review reported.
Although Sydney median home prices are the highest in the country, the latest data suggests prices fell slightly in May with concerns about an oversupply of new apartments.
The tax hikes are expected to raise $1.9 billion over the next four years for the NSW budget, compared to $150 million raised from the 4 percent tax which was announced in last year's budget.
New South Wales stamp duty and land transfer receipts were back up to $9.4 billon over the year to January 2017.
Treasurer Scott Morrison has predicted that foreign buyers would fall by more than half this year as states increase taxes and the tax office cracks down on buyers who try to skirt Foreign Investment Review Board approval.
The NSW government is also poised to widen access to its first-home buyers bonus, offering it to buyers of existing stock rather than just new homes, the AFR said.
The state budget will be announced on June 20.
Housing affordability is one of the cornerstones of Berejiklian’s agenda after she became the NSW premier earlier this year. She appointed former Reserve Bank governor Glenn Stevens as an advisor on the package which cabinet is now considering.
Foreigners made up about 11 percent of home purchases in NSW in the September quarter last year, according to NSW government data.
NSW surcharge is now above Victoria which charges 7 percent but it is still below comparable international jurisdictions facing a similar flood of foreign buyers. In Canada some provinces charge as much as 15 percent. The tax charges are in addition to normal NSW stamp duty of as high as 7 percent.
But only about 2 percent of NSW home buyers paid the surcharge because it does not affect foreign citizens provided they are permanent residents who have been in Australia for 200 days in the preceding year.
In 2015-16, FIRB approved about 13,000 purchases by foreigners in NSW, about a third of the 40,000 foreign residential approvals. FIRB's definition of foreign buyers is slightly different to NSW.
Morrison says the total number of foreign buyers will to 15,000 this year.
FIRB data suggests that the vast majority of foreign buyers come from China.
Some have argued that foreigners buy the equivalent of a quarter of new housing constructed in NSW.