State budgets have property transactions on their agenda

Recent and upcoming state budgets are bad news for foreign buyers but better news for some first home buyers.

Foreign property buyers tax

It started in Victoria and now New South Wales and Queensland state governments are set to introduce a foreign property buyer’s tax.

In its April budget, Victoria increased transfer duty for foreign buyers of residential property to 7% and also saw increases in land taxes for foreign owners, both increases to commence on 1 July.

The soon to be released New South Wales budget is expected to include the following bad news for foreign buyers of residential property:

• 4% transfer duty surcharge from 21 June 2016;
• Transfer duty on off the plan purchases payable within 3 months of contract instead of up to 15 months;
• 0.75% increase in land tax commencing in the 2017 year and no land tax free threshold.

From 1 October, in Queensland, foreign buyers of residential real estate will soon pay a 3% surcharge on transfer duty. So a foreign buyer of a $500,000 apartment will soon need to pay $30,925 in transfer duty, almost double than they currently do.

First home buyers

First home buyers in Queensland will be encouraged by the redistribution of some of these new taxes to them. The first home buyer grant (known as the Great Start Grant) is increased from $15,000 to $20,000 for 12 months for the purchase of newly constructed properties under $750,000.

In May the Northern Territory government announced that first home buyers of existing homes would be entitled to a 50% discount on their stamp duty up to a maximum of $10,000.

Tasmanian first home buyers also see their grant double from $10,000 to $20,000 until 30 June 2017.

Will the budgets impact the property industry?

The new foreign buyer taxes follow last year’s introduction of the minimum $5,000 FIRB application fee for foreign investor approvals and the finance industry’s tightening of loans to foreigners.

There are strong arguments from within the industry that these taxes will negatively impact foreign investment in residential property which has been underpinning much of the new development projects throughout Australia.

Any increase in first home buyer activity and construction of their new homes may have relatively little impact in an industry which has played a large part in the overall Australian economy recently.

The possibility of changes to the CGT and negative gearing regimes following the federal election will add to the concerns of many within the property industry.

Richie Muir

Legal Director

Richie is an experienced and commercially astute lawyer specialising in property law. He leads lawlab’s team of legal advisors and is the go-to problem solver for complex or unusual matters.  Having spent many years living and studying in Europe he now calls Brisbane home. Outside of work he juggles his time helping bring up his 2 young daughters, playing football and developing property.