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Victoria to Increase Stamp Duty and Land Tax for Foreigners

Discussion in 'General Property Chat' started by House, 25th Apr, 2016.

  1. House

    House Well-Known Member Premium Member

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    Paying their fair share by paying more? Okay then o_O
     
  2. wategos

    wategos Well-Known Member

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    well... many of them don't pay any tax on rental income so one way to claw a bit back I suppose.
     
  3. ashish1137

    ashish1137 Well-Known Member

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    So who are foreigners here?

    I hope PRs are considered as "Victorians" here. :(

    Regards
     
  4. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Politically it's a win win - increased revenue and no voter backlash, it doesn't surprise me at all.
     
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  5. TheGreenLeaf

    TheGreenLeaf Well-Known Member

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    Is a Kiwi a foreigner?
     
  6. househuntn

    househuntn Well-Known Member

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    Looking at the rate eastern melbourne suburbs are being snapped up, I always assumed foreigners came with with suitcases of cash and wouldn't care what taxes there were!
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    DUTIES ACT 2000 - SECT 3 Definitions
     
  8. melbournian

    melbournian Well-Known Member

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    i think these might affect the suburbs were the the foreign buyers are not too cashed up. As in areas like point cook (lots of chinese buyers) as these type of buyers have normally a set limit to purchase which could mean they delay it for a while to save more or borrow elsewhere.

    i think it is already to some degree having an affect on the balwyns and doncasters. Some auctions being passed in. a 600-700sqm site sold for 1mil in doncaster east which would have sold for 1.2-1.3 mil couple months ago. One thing i do know, you can't stop the mainlander chinese, if it means it is more expensive, they will just shift gears and go buy townhouses instead of mansions.
     
  9. albanga

    albanga Well-Known Member

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    Final nail in the coffin for Melbourne inner city apartments (not that it wasn't already the worst investment in Australia outside 1 trick ponies).

    Announced at the same time another 20 towers are in the approval pipeline. So what will foreign investors who buy this junk do now? Pay an increased stamp duty or simply head into another market??

    Give it a year or two and inner city Melbourne will be a CF+ strategy....ok maybe pushing it a tad but I hold plenty of fear for that market.

    P.S- Spoke to a buyers advocate 2 years ago who I asked what personal investments they had. He actually tried to sell me by saying he timed the docklands......oh dear.
     
  10. Tony3008

    Tony3008 Well-Known Member

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    Probably true, save that you pay next to no stamp duty on an OTP apartment and there's not much land to be taxed on - my Docklands flat would probably sell for $650K (not very different to what I paid in 2007), rateable value $560K, site value $50K - you could own five like mine before becoming liable for land tax.
     
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  11. JDP1

    JDP1 Well-Known Member

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    Not sure the extent of this...may drive some business (ie apartment purchases) to other areas Sydney and brisbane. Melb inner city was and still is a competitor. ..but maybe a bit less so with this. How muxh so, not sure as a fair number just park their money and forget about it. The highest returns etc are not their goal- getting money out of country away from auditable accounts and govt uncertainty is.
    Im a bit surprised sydney did not do this as inner city apts are out of reach for most aussie salaried people. i would say they need it the most.
     
  12. albanga

    albanga Well-Known Member

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    I'm confused by this. Are you saying docklands is a good investment because of little land tax??

    If so then that's all good except for the fact it has had almost no growth I think ever. No growth is fine if your a CF+ investor whereby you pocket money each week. Docklands is very heavily negative cashflow making it a horrendous investment, land tax or not.
     
  13. febstyle

    febstyle Member

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    Surely this would affect suburbs that are generally popular with the foreigners (Balwyn, box Hill, Doncaster, Glen Waverley, Surrey Hills)? Maybe not necessarily the top richest foreigners (who would be more than willing to pay the extra stamp duty cost) but those in 800k-2M mark perhaps?

    Intresting..
     
  14. big max

    big max Well-Known Member

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    Terrible for the Melb apartment market for sure.

    Well the smart money and the Asia money is moving up to Brisbane and Gold Coast big time so this will only increase that trend.
     
  15. Plutus

    Plutus Well-Known Member

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    I can't wrap my head around how foreigners would be dodging local taxes on resi prop income. Multinational I get, you just profit shift via invoicing from OS entity for services/product at local cost+profit value to ideally operate neutrally or with slight loss & foreign cash injection, but how could you do that in resi?
     
  16. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    • Not having an income. Buy in cash (as many foreigners are doing) and do not rent out aka absentee landlords.
    • Dual taxation treaties: Pay the tax in other countries
    In addition foreigners also skimp on the registration costs when buying OTP. No votes for giving concession to foreigners, so state government has decided to claw back the concession.
     
  17. wategos

    wategos Well-Known Member

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    Simple... they just never file an Australian tax return. Rent their mortgage free property through an estate agent, never declare anything, never questioned. Wouldn't be too hard to detect with some cross referencing of all known rental properties against all those declared but the ATO doesn't seem to bother much about catching them.

    Even if they rent out the property through an estate agent and the rent is paid into an Australian bank account they are not detected. The estate agents don't have to report anything from their rental roll.
     
  18. febstyle

    febstyle Member

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    Yea.. That's my thoughts too. I think the market will soften
     
  19. MTR

    MTR Well-Known Member Premium Member

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    Here are the stats (FIRB), the horse has already bolted.



    According to FIRB (Foreign Investment Review Board) data, there has been an explosion of real estate applications in the past couple of years.

    [​IMG]

    The latest count if for the 14/15 financial year. It shows that approvals have tripled since 2012/13.

    Breaking it down, we can see that most of these approvals are going into new dwellings, and a good share of those are probably going into high-rise apartments in the capitals.

    [​IMG]

    But the official data only tell us so much. For starters, this data is almost a year old now, and we don’t have any data on unofficial (illegal) purchases of existing property. We know that until late last year, FIRB was barely taking an interest in illegal purchases.

    So to get a better idea, we need to go to the NAB survey data – though it’s not perfect either.

    Here, we can see the run up in foreign purchases. There’s been strong growth in new purchases, but the survey shows there’s been a ramp up in purchases of existing property as well.

    [​IMG]

    In 2014, foreign buying accounted for 10% of sales in the existing home market.

    It’s supposed to be zero (with room for some special exceptions).

    However, since peaking in 2014, foreign buying seems to be slowing, both in the new and existing property markets.

    The foreign share of new purchases is down from 17% to 12%. The foreign frenzy seems to be cooling of its own accord.

    And there’s some interesting stories if you look at the state-by-state data.

    With new dwellings, foreign buying has slowed quite dramatically in Victoria, and noticeably in NSW and WA.

    [​IMG]

    Victoria peaked back in Q4 2015, so Victoria’s new measures are going to impact on a market that had already started slowing. They may accelerate that slowing, but it will be hard to pick out.

    The horse has already bolted.

    However, the interesting thing here is that Brisbane has started picking up some of the slack, and foreigners now account for over 20% of new property sales – that’s one in five.

    Looking at existing sales, there’s another interesting story there. We can see the slow down in Sydney and Melbourne, and in Brisbane now too. However, foreign buying is actually accelerating in Perth.

    [​IMG]

    With 9% of existing home sales going to foreigners, Perth now leads the country.

    Give Perth’s property market has slowed in recent times, makes you wonder what would of happened if FIRB had been doing its job and there were no foreign purchases…

    Anyway, looks like foreign buying has already started to cool. That’s probably driven by our government taking an increased interest, and our banks making it a little harder for foreigners to access credit.

    But I suspect the big story here is the Chinese government’s recent crack down on capital outflows. They’ve made it a lot harder to get money out of the country.

    And what we hear is that the reason why so many Chinese nationals are interested in Australian property is because they’re afraid of having their money trapped in China if things go sour.

    It’s about protecting their wealth. That’s why they’re not so fussed about growth and yield prospects, or are even happy to leave their properties empty.

    In that sense, I don’t think a bit extra on the stamp duty is going to faze them.

    And so I think this levy increase is a good idea. The Australian property market has been a solid performer precisely because we have a strong rule of law and good public services.


    MTR


     
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  20. melbournian

    melbournian Well-Known Member

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    Agree that too - these kind of stuff is not going to faze them overly.

    Asian people esp chinese can be a bit extremist (if they want something, it is sometimes to do with face etc). A lot comes down to schools, if it means an extra 20K in Stamp to get that north melbourne house so the kid can go to melbourne university, they'll fork it out or worst case go buy a smaller place unit or townhouses. They're not going to just lift and shift and move to brisbane or perth to attend Central Queensland Uni or something like that.

    You also have to take into account the business permanent residences. Some will buy milk bars, fast food outlets to get that residency similar to the nandos (which are primarly owned by indonesians in melbourne) in the late 90s. I remember talking about restrictions to a friend who has properties in melbourne, sydney and i said how you gonna buy now being a foreigner? he just laughed at me and said if you have AUD50 mil in the bank there isn't much you can't do.