Foreign buyers face huge tax hikes for investment homes left vacant

Foreigners who buy houses in Australia and leave them empty will be hit with a massive tax hike in a bid to get rid of ‘ghost’ houses and ease the rental crisis gripping the nation.

Foreigners who buy houses in Australia and leave them empty will be hit with a massive tax hike in a bid to get rid of the ghost mansions dotted around some of Australia’s most expensive suburbs.

On Sunday, Treasurer Jim Chalmers will unveil a package of measures to help ease the rental crisis gripping the nation’s capital cities, which will also include cuts to the fees paid by overseas investors who want to build homes to rent.

At present foreigners who are given permission to buy homes in Australia pay a one-off foreign investment application fee when they purchase.

If the property is left empty for six months or more in a year they must also pay an annual vacancy fee, which is set at the same level as their original application fees.

Both these taxes are to be massively increased.

Federal Treasurer Jim Chalmers wants more foreign investors to rent out their homes. Picture: Martin Ollman

Mr Chalmers said the government welcomed foreign investment because it played a crucial role in our nation’s economic success.

“These adjustments are all about making sure foreign investment aligns with the government’s agenda to lift the nation’s supply of affordable housing,” he said.

“The increased vacancy fees will encourage foreign investors to make their unused properties available to renters.”

At present a foreigner who buys a home worth $1.1 million pays $28,000 in application fees and the same amount if it is left empty.

Under the changes, which will be legislated next year, that same property will attract an $84,000 application fee and an annual tax of $169,000 if it is left empty.

If a foreigner buys a new home their application fee will stay the same but their vacancy property fee will increase by less.

The tax hikes will be more modest for foreigners who invest in build-to-rent projects.

“The higher fees for established dwellings will encourage foreign buyers to invest in new housing developments,” Mr Chalmers said.

“This creates additional housing stock, jobs in the construction industry and supports economic growth.”

From December, 14, the government will cut some classes of application fees for foreigners who invest in build-to-rent projects.

At present there is no consistency around the fees paid by foreigners who invest in build-to-rent projects, with different costs applying depending on how the land is zoned.

“Lowering the fees for these investments will help to ensure our foreign investment framework is consistent and predictable for all build-to-rent investors, and encourage the development of these projects right across the country that are specifically designed, built and managed to provide long-term rental options for Australians,” Mr Chalmers said.

In 2021-2022 there were 4228 foreign residential real ­estate sales worth $1.7 billion, 1339 of which were of existing homes.

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