CANBERRA: A Senate committee is considering boosting capital gains taxes for foreign residents of Australia. The Senate Economics Committee is expected to publicly report on the bill by June 13, following June 1 introduction of the bill to the House of Representatives by assistant treasurer Michael Sukkar. Currently, when a foreign resident disposes of real Australian property with a market value of at least A$2 million ($1.5 million), the purchaser is required to withhold 10 percent from the purchase price and pay it to the Australian Taxation Office.The foreign resident vendor must lodge a tax return at the end of the financial year, declaring their Australian assessable income, including any capital gain from asset sale, and can claim a credit for the withholding amount. Under the proposed changes, the withholding tax rate would rise to 12.5 percent and would apply to assets with a market value of A$750,000 or more.
The ruling Liberal-National Party Coalition steered legislation to establish the foreign resident capital gains withholding payments regime through parliament in early 2016, with the support of the opposition Labor party. The changes would apply from July 1, assuming they are passed by parliament. An explanatory memorandum on the bill explains that the regime was introduced in 2016 to “address low levels of compliance by foreign residents with their Australian tax obligations.” However, although Sukkar described the changes as part of a “crack down on tax avoidance,” the motivation for introducing them is broader. House prices in major Australian cities are very high and improving housing affordability was a priority of the government’s May 9 budget. The changes aim to contribute to that task by imposing the withholding payments regime on a wider range of foreign buyers of Australian property, and at a higher rate. The amendments are expected to raise an extra A$570 million over the next four years. In a related move that will be dealt with in separate legislation, the government announced in the Budget it will introduce an annual vacancy charge on new foreign owners of residential property that is not occupied or genuinely available on the rental market for at least six months each year. The Senate committee is accepting submissions on the bill until June 9.
