The New South Wales Budget Statement has recognised that the application of surcharges to foreign owned residential property developers places them at a competitive disadvantage relative to Australian owned developers. It has been acknowledged by sectors of the property industry that these surcharges may have had an adverse impact on new housing supply.
According to the Budget Statement, Australian based foreign owned developers will be granted a refund of surcharges already paid, if developed properties are sold within five years. The new arrangements will be backdated to apply from the commencement date of the surcharges. The definition of "Australian-based foreign owner developer" is yet to be announced, and other details as to the application of this new measure are eagerly awaited. Another question is whether the surcharge will apply at all for contracts exchanged after 21 June 2017 where the developer would be eligible for the surcharge rebate.
The New South Wales Government estimates that tax revenue will be decreased by $34 million over the next four financial years due to the application of these rebates. This cost is overwhelmingly made up for by the estimated revenue increase of $893 million over the next four financial years due to the increased rates of foreign investor surcharge on transfer duty and land tax.
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