Foreign property buyers will be hit with increased taxes and charges of more than $600m over the next four years in a government-led effort to reduce housing affordability pressures.
The biggest blow for offshore property buyers will be the change to their capital gains made on property and their strategy of holding properties without occupying them.
As of Tuesday’s budget, foreign and temporary tax residents will no longer be exempt from capital gains tax when selling their main residence in Australia. Moreover, existing properties held prior to this date will be grandfathered until 30 June 2019.
The withholding rate on capital gains tax that foreigners must settle when they sell property will increase to 12.5% from 10% beginning on 1 July. Currently, the withholding tax is only taken when a foreigner sells a property worth $2m or more. However, under the government’s new regime, it will now apply to the sale of properties worth $750,000 or more, widening the pool for revenue collection.
All of these changes in capital gains are estimated to add $600m into government coffers over the next four years.
Mirroring the Victorian Labor government’s new impositions on foreign buyers, Treasurer Scott Morrison also introduced a charge (to the tune of $5,000) on foreign owners of residential property when their property is unoccupied or isn’t genuinely available on the rental market for at least six months per year.
“This measure is intended to encourage foreign owners of residential property to make their properties available for rent where they are not used as a residence and so increase the number of dwellings available for Australians to live in,” Morrison said.
The new charge went into effect following Tuesday night’s budget, and will be levied annually.
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