Foreign Buyer Duty introduced to WA sparks controversy
Posted by Development Ready on May 17, 2019

The start of 2019 marked the beginning of a new controversial residential land owner surcharge in Western Australia. 

From 1 January 2019, the WA state government introduced a foreign buyer surcharge, known as the Foreign Buyers Duty. In addition to the usual transfer duty that is payable on the purchase of residential property or land, foreign buyers are now to be charged a further 7% of the value.

The western state is the last in Australia to introduce a foreign buyers surcharge, but the move has many people up in arms.

Reserve Bank assistant governor Michele Bullock spoke recently at an Urban Development Institute of Australia (UDIA) event discussing the necessity of the new charge.

“I would only observe that given the WA market is not particularly buoyant to begin with, putting a tax on it wouldn’t seem to help that circumstance,” Ms Bullock said.

The UDIA, with the Property Council, campaigned against the surcharge, with UDIA chief executive Tanya Steinbeck asking WA State Treasurer Ben Wyatt to reconsider the charge as it was deterring new investors from coming to WA.

Similar duties already apply in other states, being that of 7% in Victoria and 8% in NSW. Despite the forecast revenue of $16 million, the industry is concerned the surcharge has removed WA’s advantage as a lower-priced residential property destination for foreign buyers. The issue largely surrounds timing.

“WA has the lowest level of foreign investment and foreign students of any capital in the country, besides Darwin. The state is also on the verge of a skills shortage and we need foreign families to fill that void.” REIWA President Hayden Groves argues.

“This type of misguided policy will dampen the incentive for foreigners who are not permanent residents to locate and live here. The WA Government should be implementing policies that attract people to the state, not deterring them with unfair taxes.”

This new tax will also impact West Australians with foreign spouses. If any of the buyers involved in a purchase are considered a foreign person, then they will be charged the Foreign Buyer Duty on their share of the purchase price. The duty also applies to corporations or trusts with 50% or more foreign control/interest.

“This policy has been touted as an investor tax, that only targets the big end of town, but that simply is not the case.

“Western Australia has a long history of migrants, coming to WA to work and raise a family. This surcharge sends a clear message that the door is closed, and there certainly won’t be a welcome mat!”

Residential properties that may incur the duty include;

  • Each individual house and apartments including those bought off the plan
  • Land where houses or apartments are to be built
  • An existing building to be re-purposed to residential

Properties may be exempt if they satisfy the following;

  • Residential developments of 10 or more dwellings are considered significant and are exempt
  • Aged care facilities, commercial residential premises such as hotels or boarding houses and retirement villages are excluded from the definition of residential property
  • Additional duty will not apply to purchases of commercial industrial or mixed use properties used primarily for commercial purposes

For more information please refer to the WA Department of Finance here.

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