Victorian Gov Foreign Investment Tax

Market Insights
9 years ago
2 minutes

Today, the Victorian Treasurer Tim Pallas, of the Labor Party, is set to announce a new tax targeted at foreign buyers of Victorian real estate. 

This new tax increase is set to force foreign investors to pay around 3% of the purchase price for both houses and apartments in Victoria. Additionally, those buying property on land, will also have to pay an extra 0.5% in land tax from 2016 on both new and existing properties. These new additions are set to raise over $53.5 million over the course of four years. 

To put this into perspective for foreign buyers, if an apartment is purchased for $470,000, a further cost of $14,100 is set to be paid by the foreign-buyer. To take this a step further, if an apartment is purchased for $800,000, $24,000 would need to be paid on top of the current stamp duty charges of around $43,000.

Treasurer Pallas has claimed that the reforms and surcharges are modest, and that it reflects a demand from the Victorian people that foreign investors should take ownership of Victorian property without contributing to the services, infrastructure and society that they purchased in.

“If you own a property in the area then you should contribute accordingly, and these modest charges go some way to redressing that balance,” Pallas said.

This news comes soon after the Foreign Investment Board’s release of the FIRB Annual Report of 2013/14 - where it became evident that Chinese purchasers/investors dominated the foreign investment market, and by a substantial margin - investing nearly $12.4 billion into Australian real estate. 

The FIRB revealed that the value for property by foreign investors in Australia, reflected by the purchasers, has tripled from the previous financial year. Interestingly, the foreign demand for Australian property increased from 5% in 2011, to over 30% in 2014. A dominant amount of these purchases were new dwellings, and regularly listed as off-the-plan.

The effects of this proposal will be seen by next year's financial review.