Australia to ban foreigner investors from tax incentive

Australia may restrict a property tax scheme to only its citizens after it was revealed that foreign investors dodged close to US$ 60 mln in tax in 2013.

Australian Tax Office data showed almost half of the country’s 52,670 foreign investors that declared rental income in 2012-13, the latest figures available, claimed a loss, mostly through negative gearing, News Corp reported.

Negative gearing allows landlords to offset the cost of their investment property, such as maintenance, agent fees and interest on mortgages, against the income received from rent. It has been blamed for handing the advantage to higher-income earners and pricing lowerincome earners out of the property markets in Sydney and Melbourne, where house prices are sky- rocketing.

The government, fearing voter backlash from the 1.27 mln Australians using the system, has been loath to change the system completely, but is investigating a move on restricting or abolishing the system’s use for overseas investors.

By using negative gearing, foreign investors in 2012-13 reduced their tax bill by 73%, saving US$ 57.75 mln.

“Negative gearing by non-residents is under active consideration as part of the Tax White Paper process,” a spokesperson for Treasurer Joe Hockey told News Corp.

The impact of the scheme on the nation’s bottom line is compounded by the speed at which foreign investment is growing. From 2012-13 to 2013-14, overseas investment doubled to US$ 26.2 bln.