Double standard property legislation passes both houses

As they stand, these bills, if turned into acts, will impact investors through the following legislation:

Under the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017:

• Foreign investors will be hit with a fee starting from $5,500 for a property purchased for $1 million or less if their property has been occupied for less than 183 days in a year;
• Will penalise those who fail to submit or keep records, with a fee of $52,500; and
• Come into effect retroactively from 7.30pm, 9 May 2017.

Under The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017:

• Individual investors will be unable to claim travelling costs for deductions;
• Only allow assets to be deducted for the first time they are installed or used in a residential property;
• Come into effect retroactively from 1 July 2017.

In a joint statement by Treasurer Scott Morrison and Assistant Minister to the Treasurer Michael Sukkar, these changes will help housing affordability and private renters.

“The vacancy charge builds on the Turnbull government’s strengthened foreign investment regime to increase the number of houses available to live in,” the statement reads.

“The charge provides a financial incentive for the foreign owner to make their property available on the rental market, helping provide more homes for Australian families.”

In regards to the Housing Tax Integrity Bill, these measures are described as curbing investors who attempt to exploit the tax system.

“This [travel cost deductions reform] will improve the integrity of the tax system by preventing residential property investors from taking holidays at taxpayers’ expense,” the statement said.

“Limiting plant and equipment depreciation deductions will remove the existing opportunities for items to be depreciated by multiple owners in excess of their actual value.”

However, Tyron Hyde of Washington Brown, who spoke to Smart Property Investment previously on what the tax depreciation changes will mean for investors, said this was essentially a “knee-jerk reaction” to the housing affordability crisis, which to him, seems to be relegated to just Sydney and Melbourne. If left to its own devices, Mr Hyde believes the crisis would have sorted itself out.

“I think this was a bit of a knee-jerk reaction to the government having to be seen to be doing something to the really negative gearers in the world,” Mr Hyde said.

“In order to squash prices, I think the natural forces of the market would've been able to do that if they just waited a little bit; it's already coming back.

“They've also squashed it on many other ways on foreign investment, so I don't think this was such a necessary thing to do, and if they just waited a year or so, it would’ve occurred anyway.”

The decision to target residential property due to a broken system, Mr Hyde said, was an unfair decision when compared with other property investment categories.

“What really gets me though is that the government's saying that the system was broken in a way that you treat second-hand plant and equipment items on property,” Mr Hyde said.

“But the government continue to lets you do that on commercial, industrial, every other [category], so the same system.

“If they're so worried about the system being broken, why would they let it occur for all those other transactions?”

With the legislation now passed, Mr Hyde predicted the legislation may be a repeat of what occurred in 2004 with the government introducing a 2.25 per cent fee for the sale of property, which caused property owners to stop selling property. It was scrapped eight months later.

Mr Hyde can see these reforms lasting longer, by at least a few years.

“If a lot of people that have bought properties two, three years ago in their super fund, and now [are] struggling to sell them, and there's a lot of people in the papers crying poor because of this change, then they may start to get a groundswell of supporters to why this is really not the smartest move ever.”

Tags:

• Latest

Share