Industry body says tax changes unnecessary

ACCORDING to the Real Estate Institute of Australia (REIA), the threshold for foreign resident capital gains tax withholding has been reduced to an unnecessarily low level and agents and conveyancers will be subject to additional red tape and costs for no valid reason.

The initiative outlined in the 2017 Budget sees the threshold for foreign resident capital gains tax withholding reduced to $750,000 from the current $2 million from July 1, 2017.

REIA President Malcolm Gunning said in REIA’s view the proposed threshold of $750,000 is unjustifiable.

“If the threshold was to be reduced it should be to no less than $1.5 million,” Mr Gunning said.

“Based on data in the latest Foreign Investment Board Annual Report, 76 per cent of foreign purchasers bought in NSW and VIC and the average purchase price was $1.6 million,” he said.

“QLD accounted for a further 17 per cent of properties at an average price of $2.5 million.

“The remainder of the states and territories account for 7 per cent of properties purchased by foreign owners and the average price across Australia was $1.8 million.”

Mr Gunning said the proposed $750,000 threshold means that half the properties sold in Melbourne and Sydney will be subject to the withholding provisions yet foreign investors are buying properties at double this value.

Mr Gunning added an additional concern for REIA is the limited scope for an education campaign with a July 1 implementation.

“When the withholding tax was first introduced it applied to far less property and involved far fewer markets yet far more time was available for the REIA to work with the ATO in educating agents,” Mr Gunning said. “This isn’t simply a case of letting agents know of a new threshold,” he said. “There are a whole new set of agents in additional markets involved.

“A delay by six months would be more appropriate and introducing it part way through a financial year should be acceptable as the withholding tax was first introduced in the middle of a financial year.

“We have contacted Federal Treasurer Scott Morrison regarding our opposition and have asked that the government reconsider the threshold,” Mr Gunning said.