Has the Victorian State Government just touched the brakes or slammed on the brakes bringing demand from overseas buyers of local property to a screeching halt?
As from 1 July 2016, any new contracts for sale of a new residential property (e.g a brand new apartment), the foreign purchaser will be up for a 7% additional tax, which local buyers don’t pay.
Lets be clear, that’s not the stamp duty increasing by 7% but a whole 7% levy on the value of the property on top of the usual stamp duty.
If the contract price for the apartment is $600,000 the additional tax will be 7% on $600,000 = $42,000. In this example the off the plan (OTP) concessional stamp duty is calculated on the reduced value of say $250,000, the OTP duty for the local aussie buyer would be approx. $10,000
The foreign buyer however would pay –
- OTP duty of $10,000, plus
- Foreign tax of $42,000, totalling
- a whopping $52,000.
Or on a brand new town house of $1,000,000
- usual stamp duty of $55,000
- foreign tax of $70,000, totalling
- a staggering $125,000
Now in economics, is this just tweaking and adjusting the levers, or is this the sledgehammer of economic management – and pure government greed?
The rationale for the surcharge – Treasurer Tim Pallas
“No Victorians will pay these surcharges. This is about ensuring foreign owners pay their fair share.”
“It’s only fair that foreign buyers of residential real estate, who enjoy the capital growth as a result of Victoria’s liveability and the amenity of our cities, contribute to the maintenance of government services and infrastructure.”
State Revenue Office Victoria – foreign purchasers
NSW + Qld have both imposed the foreign tax. SA and WA have not.
Vox Pop. A common view is this will not stop the buying interest of rich cashed up Chinese. Only time will tell, but my bet is it will curtail foreign buyer demand