Australia 'Not A Property Tax Haven'

by Mary Swire, Tax-News.com, Hong Kong

08 April 2010

Whilst discussing foreign investment in Australian property, the Housing Minister, Tanya Plibersek, has rejected the suggestion that Australia is a property tax haven.

During a television interview, Plibersek disclosed that the latest figures for January this year had confirmed that only about 1.6% – 1.7% of new properties were sold to foreign investors, and therefore within the usual historical range, but that there had been reports of overseas purchasers increasing prices for higher-priced houses. So as to ascertain that those purchases were made in accordance with the regulations, the Foreign Investment Review Board and the Treasury have been asked to investigate.

Plibersek denied that negative gearing and capital gains tax breaks were turning Australia into a tax haven for property investors. Her opinion was that the exemption of a family’s primary residence from capital gains encouraged home ownership in Australia, while the availability to offset losses from negative gearing against income tax helped the supply of residential rental properties.

She pointed out that the promotion of home ownership had always been considered positively in Australia, while there is, presently, a relative shortage of rental property in the country.

She would not be drawn into divulging any property tax measures which would come out of the Henry tax review, aside from a confirmation that the review had covered the crucial effect of taxation on the supply of housing in the country. Before any action was to be taken, one would, she said, need to look at both the social and economic effects of any prospective tax changes.

Her comments came after Australia’s Treasurer, Wayne Swan, had, last month, also played down fears in the housing sector that proposed measures arising out of the Henry tax review could include a cancellation of the existing negative gearing tax breaks. However, it is widely expected that, when the review is finally published, it will not comment favourably on the large tax breaks received by rental housing as part of its survey of the tax treatment of savings and investment.

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