In a major policy reversal, the New South Wales Government has officially removed its 9 per cent foreign purchaser duty surcharge for eligible build-to-rent and retirement living developments, a move industry leaders say marks the beginning of the end for a decade of counterproductive property taxes.
The decision has been praised by the Housing Industry Association (HIA), which has long argued that punitive surcharges have starved the state of the critical international capital needed to kickstart major apartment and community developments.
HIA Chief Economist Tim Reardon described the reform as a vital course correction, urging other jurisdictions across Australia to immediately review their own tax frameworks.
“The NSW Government has taken an important step toward improving housing supply. Other states should now follow its lead and remove foreign investor taxes that discourage the construction of new homes,” Mr Reardon said.
Industry advocates argue that the public perception of foreign investment in real estate is fundamentally misunderstood, noting that international backers do not compete with everyday Australian buyers for existing stock.
“The reality is that foreign investors have been prohibited from purchasing established homes in Australia since 1975,” Mr Reardon.
“Taxing foreign investment in new housing does not reduce demand. It reduces the amount of capital available to build homes. Their role in the residential market is overwhelmingly concentrated on financing, developing and constructing new housing.”
For over ten years, state governments have relied on foreign investor surcharges as highly visible revenue-raising measures.
However, the HIA contends that these policies have heavily backfired by stalling massive residential projects before they can even break ground, resulting in a net loss for public treasuries.
“These taxes were introduced as revenue measures, but there is a growing case that they are revenue negative,” Mr Reardon said.
“When projects do not proceed, governments lose far more than a foreign purchaser surcharge. They lose the GST, payroll tax, income tax and company tax associated with the homes that were never built.”
With the nation facing an acute rental and housing shortage, the development sector believes that opening the doors to international financing is a seamless way to stimulate the economy and expand housing options without relying on taxpayer funds.
“The potential housing supply benefits from removing foreign investor taxes on new housing could exceed those of many of the headline housing initiatives announced in recent budgets,” he said.
“This is the easy win. It requires no new government spending. It increases housing supply. It creates jobs. It raises government revenue… Foreign investor taxes have become one of the worst own goals in Australian housing policy.”