The Government will also stop foreign and temporary tax residents from claiming the main residence CGT exemption when they sell property in Australia. Foreign and temporary tax residents who held a property on 9 May 2017 can continue to claim the exemption until 30 June 2019.
Mr Gunning said: “The change in the threshold for foreign resident capital gains tax withholding is not welcome and could be considered misguided as most foreign investors buy higher valued properties in Sydney and Melbourne and to a lesser extent in Brisbane.
“It is more red tape and not necessary, and the REIA will be taking this up with the Government. With the median house price of $743,776 across Australia this will mean most properties will be subject to this requirement and results in more work for sales agents and conveyancers.
“Further, depending on the workload this presents for the Australian Tax Office it may even delay settlements.”
The latest Foreign Investment Board Annual Report for 2015-16, showed that 76% of foreign purchasers bought in NSW and Victoria and that the overall average price was $1.8 million.
Other measures introduced for foreign investors, include:
Limiting foreign ownership in new developments
The Government is introducing a 50% cap on pre-approved foreign ownership in new developments. Developments have to be multi-storey and have at least 50 dwellings.
This will be applied through conditions imposed on New Dwelling Exemption Certificates. Currently certificates do not limit the proportion of dwellings that may be sold to foreign investors.
Charging foreign owners who leave their residential properties vacant
The Government is now applying an annual charge of at least $5,000 (reflecting the original application fee) to foreign owners who leave their properties unoccupied or unavailable for rent for six months or more each year. This will be administered by the ATO.
For more information on the new rules, please visit here.