CFMEU VIC Secretary, John Setka is calling on the Victorian Treasurer, Tim Pallas, to follow the lead of NSW, and remove the foreign purchaser’s additional duty and restructure stamp duty.
The NSW Government announced on Tuesday they will undertake one of the state’s largest tax reforms with stamp duty to be phased out to boost the economy as NSW records a historic $16 billion budget deficit.
Mr. Setka is calling on the Victorian government to follow suit and remove the additional 8% for foreign investors on their stamp duty, a policy that was introduced in 2015:
“Forecasts for 2021-22 indicate the FPAD policy completely hamstrung the economy. New developments have slowed to the point where our city will face major house supply issues, and local purchasers are being disadvantaged.”
The Victorian construction industry experienced a significant 35.3% drop in residential building activity in the third quarter of 2020 (compared with Q3 2019) , Mr. Setka exclaims it is imperative that stamp duty and extra costs for foreign investors are now removed in order to stimulate the local economy and avoid a detrimental loss in state revenue and economic growth.
“Construction is vital to the economy and if stamp duty remains in Victoria but not NSW, investors will take their money to NSW, meaning we will lose out massively as a state.”
Mr. Setka further states that whilst foreign investment moving away from Melbourne was a trend before COVID-19, the pandemic has further compounded the issue of lost revenue; another reason to remove the additional stamp duty and costs for foreign investors and stimulate much needed growth for the industry:
“Foreign investment is desperately needed. Although this policy may have been justified under a period of economic growth, the pandemic has shifted our economy dramatically.
The current market is no longer palatable to international buyers, and the revenue generated from the increased stamp duty levy does not compensate for the reduction in revenue generated from fewer sales.”
Foreign investors comprise of 71% of presale purchases in Victoria. The FPAD policy introduced in 2015 has resulted in a significant drop in presales, with data showing a strong reduction in numbers of presales, from an average of 134 apartment presales per month in 2015- 2016 financial year, down to an average of 33 sales per month in the 2019-2020 financial year:
“Removing the FPAD will see the Victorian economy experience a major increase in state revenue, housing supply, and payroll tax, as well as the taxes and employment generated from suppliers and workers.” says Mr. Setka
The strength of the construction industry is a strong indicator for overall economic health, and at such a critical point in our time, removing the FPAD will assist Victoria significantly with increasing housing supply, state revenue and generating major employment for our state.