Foreign developers of major projects in SA offered relief from 7 per cent surcharge

Adelaide’s burgeoning CBD apartment market has been given a boost following changes to a state tax on foreign property investors.

Adelaide’s apartment market has been given a boost following changes to SA’s foreign investor tax.

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Adelaide’s burgeoning CBD apartment market has been given a boost following changes to a state tax on foreign property investors.

The changes will exempt foreign developers from the State Government’s 7 per cent foreign ownership surcharge in cases where a significant residential development is planned.

In a revenue ruling issued by the State Government in December, significant developments include projects comprising 20 or more allotments.

Apartment projects and residential developments across the state can qualify for the ex-gratia relief, which will be awarded on a “case-by-case basis”.

Property Council SA executive director Daniel Gannon said the decision was a step in the right direction, but renewed calls for the complete abolition of the surcharge.

“It’s a good first step and reveals a willingness from the Government to listen and review taxes that unfairly penalise South Australia’s economy,” he said.

“Foreign investor taxes are counter-productive and act as a disincentive for investment in South Australia, but particularly damaging because they affect the diversity of housing available in the market.

“While complete abolition of this tax remains a policy priority, this relief will be welcomed by investors looking at South Australia as an attractive place to invest.”

The former Labor Government introduced the foreign ownership surcharge in January last year, applying it to foreign investors who acquire residential property across the state.

It had initially been set at 4 per cent, but was lifted to 7 per cent following Parliament’s rejection of the proposed bank tax in 2017.

As well as applying to projects that meet the 20 allotment threshold, other developments that are expected to make a “significant contribution” to a particular region can also apply for tax relief as part of the latest changes.

A “regional significance test” considers factors including the contribution to housing stock and infrastructure in the region, and the economic and social impact, but it does not apply to metropolitan Adelaide.

Real Estate Institute SA chief executive Greg Troughton said the changes to the surcharge didn’t go far enough, backing the Property Council's calls for its complete abolition.

“This was a dog whistle policy and should be removed immediately,” he said.

“It is a retrograde policy introduced because the eastern states did so because they had a problem.

“We don’t have a problem and in fact want population growth. The Foreign Investment Review Board and its policies remain sufficient, hence the revenue ruling is now just trying to relieve the nonsense impact that is the foreign ownership surcharge.”

Treasurer Rob Lucas ruled out further changes in the short-term.

“This initiative will assist the supply of housing as well as economic and jobs growth by providing relief for significant developments of new residential homes in SA,” he said.

“Until the Marshall Liberal Government has been able to fix the financial mess we inherited from the Labor Government, we will not be able to provide any further relief from the surcharge.”

A report from international real estate group Colliers International suggested close to 30 per cent of Adelaide’s apartment developments completed last year were funded by Chinese interests, with many sold to Chinese investors.

The figures included one of the city’s biggest projects, the $300 million West Franklin development, which is nearing completion.