Foreign home buyers set to pay higher taxes under Victoria Government plan

Updated

Foreign home buyers investing in the Victorian market will be forced to pay higher taxes, under a plan set to be introduced in next week's state budget.

Under the plan, overseas investors would be forced to pay an extra 3 per cent stamp duty and a 0.5 per cent land tax surcharge.

The Government said the plan would raise an estimated $330 million over four years.

Treasurer Tim Pallas said the "modest" tax was aimed at ensuring foreign buyers paid their fair share of taxes.

"We think it's inherently unfair on Victorians for foreign purchasers to take the gains of owning property in Victoria through the services and infrastructure that Victorians pay over an extended period of time without contributing their fair share," he said.

Foreign investment in housing in Victoria was worth $14 billion last financial year, up from $2 billion five years ago.

Mr Pallas said figures from the Foreign Investment Review Board found residential property in Victoria was the most in demand in Australia.

But he said was not expecting the tax to cool demand from foreign investors.

"That of course is the responsibility of the Federal Government through their foreign investment approval processes," Mr Pallas said.

Concerns tax could affect Victoria's construction industry

Property Council of Australia chief executive Ken Morrison said he was concerned higher taxes could slow down the construction industry.

"At the moment it's housing construction which is really playing a very important role in our economy as well as adding to overall housing supply, which is good for everybody," he said.

Shadow treasurer Michael O'Brien also raised concerns about the new tax, saying it would be difficult to enforce and easily avoided by investors.

"There'll be a lot of foreign investors who will have friends and agents who are Australian residents," he said.

"All they'll need to do is purchase their property through [them] and they'll avoid this new tax."

Mr O'Brien described the plan as nothing more than a "thought bubble".

"[Premier] Daniel Andrews is trying to act tough but he hasn't done his homework, he hasn't thought it through and it won't raise the sort of revenue he's claiming."

Topics: business-economics-and-finance, state-parliament, government-and-politics, federal---state-issues, melbourne-3000

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