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June 20, 2024
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States stand by taxes for foreign buyers criticised as ‘discriminatory’ by the IMF

The number of foreign purchasers buying homes is hard to track.

When federal Treasurer Jim Chalmers last month tripled the investment fee for purchases of established homes and doubled the vacancy fee for homes owned by overseas buyers – measures forecast raise to $525 million over five years – he said one aim was to boost Tax Office funding to be able to better calculate that number.

Taxes’ ‘limited role’

The IMF last week said migration surges had contributed to rising prices, but economists point to the experience of the pandemic when, despite closed borders, housing prices soared because of ultra-cheap credit and a move to smaller households, which lifted overall demand for homes.

In its annual report on the Australian economy, the IMF said greater housing stock was needed urgently to improve affordability. In line with past reports, it also criticised state surcharges on foreigner buyers, calling them discriminatory capital flow management (CFM) measures because they were based on residence.

“Measures such as foreign surcharge on land taxes in NSW and Tasmania are likely to have a very limited role in supporting affordability,” it said.

“They are classified as CFM measures under the IMF’s institutional view and should be replaced by non-discriminatory measures.”

The Victorian government, however, said its additional charges aimed to ensure that foreign purchasers contributed to the costs of infrastructure and government services.

South Australian Treasurer Stephen Mullighan. AAP

A spokesman for Queensland Treasurer Cameron Dick declined to comment, and a Tasmanian government spokeswoman said she could not comment in the time available.

But while they also emphasised the revenue purpose of higher surcharges for foreign property buyers, some states also linked them to affordability.

“Western Australia implemented a foreign buyers surcharge in line with every other state,” a spokesperson said.

“The surcharge reduces the ability for foreign buyers to crowd out domestic homebuyers and push up prices, and ensures foreign buyers contribute towards the infrastructure they utilise.”

South Australian Treasurer Stephen Mullighan said higher foreigner surcharges allowed the state to lower some imposts for domestic buyers.

“In SA the additional revenue gained from the foreign owner surcharge has contributed to the state’s capacity to abolish stamp duty for domestic first home buyers building or buying a new residential property, thereby improving affordability and supply,” Mr Mulligan said.

“We are also directly investing in social and affordable housing initiatives as part of our $474.7 million better housing future plan.”

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