WA’s State Budget is generally being seen as positive for the real estate industry; not because of what it did, but mainly because of what it didn’t do.
There were fears that, faced with the State’s economic state, the Budget would seek to boost revenues by hitting WA residents with higher property taxes and cutting some incentives.
However, Treasurer, Ben Wyatt, announced that the State Government did not consider increases to property taxes for WA residents, recognising the impact of the three consecutive land tax increases in previous Budgets. And there was no mention of any changes to incentives for first home buyers, so the $10,000 grant for new homes still applies.
While Damian Collins, REIWA’s Deputy President, said it was pleasing to hear there would be no increases to property taxes for WA residents. On the other hand, REIWA isn’t happy with the Government’s plan to introduce a 4% surcharge on foreign individuals and entities who purchase residential properties after 1 January 2019. The move is forecast to create $49 million in revenue by 2020-21.
It said the introduction of a new foreign owner duty surcharge could hinder overseas property investment. “The Government expects to create revenue from this surcharge. However, it may only worsen the situation in terms of transfer duty revenue, as potential foreign investors may be less encouraged to purchase residential property in WA,” said Mr Collins.
In its pre-budget submission, REIWA recommended the Government introduce five key areas of reform:
- Make no further changes to rates or thresholds for land tax.
- No increase to transfer duty rates or change thresholds.
- Undertake a state tax review that ultimately removes transfer duty.
- Maintain the existing transfer duty exemption for first home buyers at $430,000 and re-introduce the $3,000 First Home Owners Grant for existing dwellings.
- Introduce a $10,000 concession on transfer duty for seniors over the age of 65 to encourage ‘right sizing’.
While a few of its recommendations were not addressed in the Budget, REIWA expressed its appreciation with the decision not to hike property taxes, given the Government’s focus on reducing State debt.
The Property Council would also be pleased about the decision not to increase property taxes. In its pre-budget submission, the Council pointed out that revenue from property taxes in WA were growing at a faster rate than the rest of Australia despite the depressed state of the local market. Among other things, it said confidence in the investment and construction sectors would be boosted by not increasing State property taxes.