In the state budget delivered on 10 May 2018, Western Australia announced a 7% foreign purchaser duty surcharge to be introduced on 1 January 2019. Prior to this, Western Australia announced a 4% foreign surcharge on residential property acquired by foreign individuals, corporations and trusts in September 2017.
These foreign purchaser duty surcharges are now imposed by all States except Tasmania, although the scope and rates vary. "Increasing the Foreign Buyers Surcharge to seven per cent will bring Western Australia in line with other states and provides this government with additional revenue to help the state's financial position," West Australia Treasurer Ben Wyatt said in a statement.
"Importantly, this decision increases a surcharge that will only apply to foreign investors. Western Australian households and businesses will not pay the surcharge.
"It is fair for foreign owners of residential property, who benefit from our services and infrastructure, to make a contribution to budget repair."
Real Estate Institute of Western Australia president Hayden Groves said the timing of the impost would be problematic for the state's housing sector. "Taxes imposed on foreign buyers are excusable when property markets are flourishing and foreign buyers are pushing up values, but not when they're struggling like ours is," Mr Groves told Australia China Business Review. He added, "It'll mean that at Perth's median house price of AUD520,000, a foreign buyer will pay about AUD56,000 in duty; a significant disincentive to invest here"
Australia has traditionally taken more of a regulatory as opposed to a restricting stance on foreign ownership of property over the years. This new ruling however, could mean a slow down on foreign buying once the new tax is in place. Higher taxes mean higher revenues but it discourages more foreign investments. Those looking to invest in Australia will have to act quickly before the new taxes take effect in 2019.
Under the new laws, non-resident buyers can only purchase new properties, not established ones. Non-residents who purchase property in Australia without first seeking approval from the Foreign Investment Review Board (FIRB) also face fines of up to AUD135,000, three years' imprisonment or both. Companies breaching these rules can be fined up to AUD675,000, while buyers' agents and real estate agents who help foreign buyers violate these rules also face stiff penalties.
In addition to these strict conditions, foreigners who want to buy an Australian investment property must pay an application fee. This fee is AUD5,000 for properties valued under AUD1 million, and AUD10,000 for properties over AUD1 million. It then increases by AUD10,000 for each additional million dollars in property value. Paying this fee does not guarantee that a buyer will be able to purchase the property they want.
These legislative changes were closely followed by changes to the foreign investor lending policies of major banks. ANZ and Westpac stopped offering home loans to non-residents altogether, while NAB dropped its maximum loan to valuation ratio (LVR) to 60% - meaning overseas buyers need a deposit of at least 40% in order to get mortgage financing.
Find out more about these rules, investing in Australia and how to benefit before 1 January 2019 by joining these events, held in collaboration with Bornion Realty, PMC Facilities & Real Estate (EM) Sdn Bhd and Trident Property Partners Perth:
KOTA KINABALU Hyatt Regency Hotel 27th & 28th Oct 2018 11am - 4pm 1pm - Rediscover Redevelopment in Perth CBD talk
MIRI Hotel Pullman Miri Waterfront 30th & 31st Oct 2018 5pm - 9pm 7pm - Rediscover Redevelopment in Perth CBD talk
KUCHING Hotel Pullman Kuching 3rd & 4th Oct 2018 11am - 4pm 1pm - Rediscover Redevelopment in Perth CBD talk
Register your interest by contacting +60 16939700 (April) or emailing firstname.lastname@example.org