A new tax on foreigners buying property in Victoria will add about $15,000 to the price of an average city apartment, the state government has revealed as it defends the extra stamp duty fee in the face of industry unrest.
The government has come under furious pressure from the property sector worried the fresh fee will deter offshore buyers and drive away investors to other states.
Property Council Victorian president Jennifer Cunich hit out at the new regime at an industry forum on Tuesday, saying it “represents an unintended overreach that undermines the government’s stated goals”.
The surprise 3 per cent stamp duty surcharge on foreigners and a 0.5 per cent land impost on absentee landlords will apply to any sale contracts signed after last week’s budget.
Treasurer Tim Pallas told Tuesday’s industry forum foreign buyers were getting the benefit of capital growth without contributing to services.
“That’s why we’re asking non-resident landowners and buyers to make a contribution,” he said.
Mr Pallas’ office confirmed the 3 per cent tax sting would apply to the end value of all residential real estate, including off-the-plan apartments, houses and land.
Foreigners spent a whopping $34.7 billion on Australian property in 2013-14, up from $17.6 billion the year before.
Most of the cash went into off-the-plan apartments in Sydney and Melbourne.
Previously foreigners paid the same concessional stamp duty rate as Australian residents.
In Victoria it is charged at a reduced rate for off-the-plan sales – the most common way of selling apartments and house and land packages.
The extra stamp duty slug will add $15,000 to the cost of a $500,000 city apartment.
It follows the federal government’s new $5000 fee for offshore buyers purchasing property worth less than $1 million or $10,000 for sales above the million-dollar threshold.
The state government initially said the new Victorian tax would apply to locally-based but foreign-controlled developers, such as Mirvac and Australand.
But that announcement prompted a storm of protest and furious behind-the-scenes lobbying by major property players concerned they would caught out.
Mr Pallas moved to ease industry concerns saying he would apply “carve out” provisions for some businesses, although it was still unclear what foreign ownership threshold would apply.
“We have provided a capacity for carve out arrangements in particular in respect of corporations,” he said.
At the forum, Mr Pallas also raised the possibility of further state asset sales in addition to the Port of Melbourne.
Legislation to sell the port would be introduced to Parliament “very shortly” but the government was also considering the sale of electricity generator Snowy Hydro.
“This, along with a number of others, should be up for continuing consideration,” Mr Pallas said.