Encouraging budget dampened by a further slug on foreign investors

The Queensland State Budget released today contained several positive initiatives for the property industry, but unfortunately the Queensland Government has succumbed to yet another potentially economically damaging additional tax on foreign investors.

Foreign Investor Land Tax Surcharge

The introduction of a land tax surcharge on foreign property owners comes 12 months after the State Government introduced an additional stamp duty surcharge on foreign property investors. Both represent a broken election promise to not introduce new taxes, fees or charges, says Property Council Executive Director, Chris Mountford.

“Foreign investment in residential real estate is a vital part of the Queensland economy,” says Mr Mountford.

“Foreign investment in real estate gets new projects off the ground, increases housing stock, creates jobs and increases tax collections to all levels of government.

“The Queensland Government is playing a dangerous game by upping taxes on foreign investors. If we keep pushing up the costs of investing here, ultimately another part of the globe will become a more attractive place to invest, and the money and associated jobs will be redirected. We are not just competing with the southern states, we are competing with the rest of the world. 

“A recent report by ACIL Allen, commissioned by the Property Council, found that if foreign investment in new residential dwellings fell by 20 per cent across the country, it would reduce Australia’s economic output by a cumulative $14.8 billion over 10 years, reduce annual real GDP by $2.3 billion and result in a $5 billion loss in Commonwealth revenues and $1 billion in state revenues.

“We will need to examine  the detail of this proposed foreign investment land tax surcharge to ensure it doesn’t become an accidental tax on Queensland homebuyers as was the case with the initial drafting of last year’s stamp duty surcharge. And of course in the future, renters may feel the brunt of this additional tax being passed onto them through higher rents.

First home buyers

“On a more positive note, the Government’s decision to extend the $5,000 boost for first home buyers purchasing new property for a further six months is welcomed. This is a great example of a program not only supporting Queenslanders into their first home, but also 
leveraging the job generating capacity of the property industry. 

Planning and Cities 

“It is also pleasing to see money allocated to other important initiatives championed by the Property Council. This includes money to undertake a strategic assessment of environmental values in South East Queensland, which will hopefully resolve the ongoing disconnection between environmental and land use policy in the region at a local, state and national level. 

“Money has also been allocated to monitor the implementation of the South East Queensland Regional Plan (SEQRP). This was a key issue pushed by the Property Council in our response to the draft plan released last year, and it is great to see the Government commit to action. The next step is to ensure this monitoring is done independently. 

“We have also long-championed the idea of City Deals as a mechanism to tackle urban policy and productivity challenges. The establishment of a Cities Transformation Taskforce to drive this agenda within the State Government is exciting. 

Cross River Rail 

“However the biggest news of the day was the Government’s commitment to go it alone on Cross River Rail (CRR). 

“In recent weeks the Property Council has been calling for an increased level of investment in infrastructure. And while there is only a very small $2b increase in total capital expenditure over the forward estimates, the decision to move forward and deliver CRR is supported. 

“CRR is city shaping infrastructure that will not only create jobs during construction, but unlock greater levels of economic activity across the South East over the long-term. 

“Importantly, the Government has ruled out ‘value capture’ taxes as a means of funding the project – agreeing with the Property Council’s position that new property taxes would only erode the project’s potential economic benefits.

“As with many other initiatives contained in this Budget, the Government is looking to partner with the private sector to achieve innovative outcomes and maximise the benefits of the project to the state economy.

“We encourage the Government to work with existing land holders to fully leverage the impact of this infrastructure investment as well as exploring PPPs and other innovations. 

“CRR has been plagued by uncertainty, and today’s announcement sets a clear path forward. It’s now time for all levels of government and the private sector to work together to maximise the benefits to Queenslanders from this project proceeding.