Annual charge on foreign owners of under-utilised residential property
The Government has announced its intention to introduce an annual levy which will apply to foreign owners of residential property located in Australia. The charge will apply in cases where the property is neither occupied, nor genuinely available for rent for at least six months of the year.
The charge itself is to be equal to the foreign investment application fee which is imposed at the time the property is acquired by the foreign owner. The measure is anticipated to raise approximately $16.3 million for the Government coffers over a four year period.
The charge will be administered by the ATO and will apply with immediate effect to foreign persons who make a foreign investment application for residential property from 7.30pm on 9 May 2017.
A separate measure is also proposed to be introduced by the Victorian Government on inner-Melbourne houses and apartments which are vacant for in excess of six months. A Vacant Residential Property Tax (VRPT) will be levied at 1% of the capital improved value of each property. This measure is set to apply from 1 January 2018 to all owners, not just foreign owners.
The so called ‘ghost house’ reforms are a welcome attempt to encourage foreign owners of residential property to make their properties available for rent. This should help to increase the supply of premium residential housing stock in capital cities.
There will be an effective ‘double whammy’ where foreign owners acquire property in inner-Melbourne and crystallise liability to both the ghost-property tax and the VRPT. It is not anticipated that any relief or offset will be made available for this.