Tuesday 30 May
Senator RHIANNON: I want to move on to issues to do with foreign investors. Can I confirm that the charge or levy of $5,000 is applicable to foreign investors who need approval from the Foreign Investment Review Board to purchase a property?
Mr Brake : There are existing fees which are required to be paid for foreign investors wishing to purchase residential real estate. I am not sure, but I think you may be talking about the budget measure relating to the vacancy charge where properties are left vacant. There are the two issues there.
Senator RHIANNON: Yes. You have one that has a $5,000 levy.
Mr Brake : Correct. As I said, there are existing fees which are payable for foreign investors wishing to purchase residential real estate. It is a scale of fees. If the price of the acquisition is $1 million or less, the fee payable is $5,000. If it is more than $1 million and less than $2 million, the fee payable is $10,100. It increases with the price of dwelling.
Senator RHIANNON: How many properties are currently owned by investors who meet this definition? Could we have the number that are under $1 million, $1 million to $2 million et cetera?
Mr Brake : I do not think we could probably give you an estimate of the overall stock of dwellings owned by foreigners.
Senator RHIANNON: Not even an estimate?
Mr Brake : We can take it on notice and see what we can do. We have figures on how many applications are received each year, so we can provide that information, but for stock we would obviously need to go back for a long period of time.
Senator Cormann: We have taken it on notice and will see what we can do.
Senator RHIANNON: Thank you. Do you have any figures about vacancy at all—like how many of the properties are vacant?
Mr Brake : As part of our own Foreign Investment Review Board, as there is not currently a conditional requirement for an additional levy, where the property is vacant we do not currently collect that data ourselves.
Senator RHIANNON: I have been interested in this and picked up some information from the New South Wales government that suggests that in the period July 2016 to February 2017 total foreign residential investor purchases were 2,153 out of a possible 142,168 residential purchases. That actually suggests a low rate of foreign investment in residential real estate in the period. It comes out at about 1.5 per cent. Does this accord with your information and estimates for Australia as a whole? Is that a fair trend that we are seeing around the country?
Mr Brake : We will take that on notice and provide some more information.
Senator RHIANNON: How many properties are expected to be made available for rent as a result of this policy that otherwise would not have been made available?
Mr Brake : We would anticipate that the vacancy charge encourages holders of vacant property to make those properties available to rent, so you would expect that there would be some behavioural response. I should note that the measure applies to purchasers who are making an application from budget night on. So it will not apply to foreign investors who already own property. It will be only for foreign investors making applications from budget night. So you would expect that the impact would build over time.
Senator RHIANNON: My question was actually about figures and, according to your fact sheet 1.6, you have some figures that suggest that you have come up with some idea or some estimation. You expected it to raise $20 million?
Mr Lonsdale : We would have figures. They would underline the costings. But we do not have them here. If you would like them, we are very happy to take that question on notice.
Senator RHIANNON: I mean—
Senator Cormann: The officer has taken it on notice.
Senator RHIANNON: I heard that well and truly, but it is in fact sheet 1.6, which is one of, obviously, the top order of what would be read when people are trying to sort this out. The charge is expected to raise $20 million, which equals a $5,000 charge on 4,000 properties. You have obviously come up with a figure that must be in the heads of the people who are sitting behind these desks. So I do not understand why it has to be taken on notice when you have worked it out.
Senator Cormann: There are a lot of things that are worked out as part of a budget which obviously has a significant number of measures in it, and there is a lot of detail that underpins it all. The officer has taken it on notice in order to ensure that we can provide you with an accurate response, and that is the way the process usually works.
Senator RHIANNON: But, Minister or Deputy Secretary, how can you have estimated that without having some estimate on the number of vacant properties and some estimate of change of behaviour?
Senator Cormann: That was not the evidence. The evidence was that we will take the question on notice so we can review all of the information we hold and provide you with an appropriate response on notice.
Senator RHIANNON: How did you arrive at the $5,000 figure then?
Senator Cormann: But that is the same question asked in a different way.
Senator RHIANNON: But it is fair enough. It is estimates and you have this housing affordability package. You tell us in every second sentence, Minister, that you are dealing with housing affordability. When we ask questions, there is nothing solid behind it. $5,000 is your definite figure; how did you come to it?
Senator Cormann: What I am saying is that we have a package of measures which, taken together, is designed to boost supply of affordable housing and boost supply of housing generally. In relation to this measure, we anticipate that there will be a behavioural response by relevant owners of these vacant properties—that is, that either they will make the property genuinely available for rent or they might dispose of the property because they want to avoid paying this particular tax. Yes, you are quite right that, in putting together these measures and costing the impact of these measures, various assumptions are made in order to come up with the relevant forecasts. You are asking a question that very much goes to that underlying detail, and we have taken that question on notice.
Senator RHIANNON: How will the enforcement work? How will you assess if a property is occupied or available to rent?
Mr Brake : The administration and compliance work will be done by the tax office, so it will not be the responsibility of—
Senator Cormann: This is a pre-existing concept, I hasten to add. The tax office already has a definition when it comes to, for example, the concept of a property being genuinely available for rent. In the measure—I think it is in the measure description, from memory—we are talking about the property being occupied or genuinely available for rent for at least six months out of the previous 12.
Senator RHIANNON: Does that mean that all foreign held properties will be assessed for use, or will all properties be assessed for use and then the charge applied only to those owned by foreign investors?
Mr Konza : We do not have too much to say because this is a government budget proposal. However, I can, perhaps, make some observations that will help you with it. The proposal is that everyone—that is, all those foreign persons who have bought a property after 9 May 2017—will be required to make a declaration as to whether their property was occupied or not. Most of those people will declare that their properties were occupied, some will declare that they were not, and levies will be charged on those who have declared that they were not occupied. We will have to make sure that declarations are received from all those who have purchased a property, and we will do that through data matching and through normal compliance action that we are well used to.
In respect of those declarations where they say that they are occupied, we will have to check in some cases to make sure that they are correct. In some cases (a) most properties are in fact occupied, (b) most people will now move to have their property occupied given the economic indicator that has been sent by the levy to them, and (c) some people may value their property so greatly that they do not want anyone in there and they will pay the levy because they prefer it pristine. We will then be able to use data matching to look at ways of matching properties that appear to be unoccupied with those that are said to be occupied. That has to be worked up, and it has to be worked up after we have seen the actual legislation as well. Finally, we do accept community information as well. I would expect that we would be getting some people who would be telling us based on their own observations whether they think properties are occupied, and we chase up all community information.
Senator RHIANNON: Thank you. Minister, if this is a housing affordability measure designed to increase supply, how do you justify applying an additional charge only on vacant properties owned by foreign investors and not domestic investors?
Senator Cormann: Because that is the judgement we have made. You can go to the next election with a policy that you want to apply of a tax across the board. That is your prerogative. We took the view that if you have a foreign investor who is purchasing an apartment with the intention of leaving it vacant, then this measure will help encourage a behavioural response where the property is either occupied or genuinely made available for rent and, as such, increasing the supply of rental accommodation, or the property is disposed of by the foreign investor, in those circumstances also increasing the supply of available properties in the market. You are quite entitled to come to a different judgement, but that is the judgement that we have made.
Senator RHIANNON: I was not questioning that you have made a judgement. Because you are the one who constantly links everything that you put forward here with housing affordability, the question was: if you are arguing this is to expand housing affordability, why did you not also apply it to domestic investors?
Senator Cormann: Because we have made a judgement that it would not be appropriate to apply this measure to domestic investors. We made a decision that it was appropriate, in all of the circumstances, to apply it to foreign investors. That is in the context of an assessed increase in the incidence of properties being purchased by people residing overseas with the intention of keeping the property vacant instead of having it either occupied or genuinely available for rent. That is the specific issue that this measure seeks to address. We are not seeking to address anything else.
Senator RHIANNON: What information is Treasury and/or the ATO planning to release publicly in relation to the national register of foreign ownership of land titles?
Mr Brake : Senator, are you talking there about agricultural land?
Senator RHIANNON: I am mainly talking about houses. I am interested in whether there will be information on the number of properties purchased, not just approved as is currently the case.
Mr McKissack : The Land Register will be released in the second half of this year. It will release aggregate data on foreign holdings of land, but not individual holding data.
Senator RHIANNON: Will it includes citizenship or visa status details?
Mr McKissack : I think we have not decided on the exact detail. We will probably have regional data and perhaps data by country, but I am not sure about visa status.
Senator RHIANNON: And the location of properties?
Mr McKissack : By broad region; obviously, we do not want to identify people by individual addresses, but certainly by state and territory.
Senator RHIANNON: Will location and cost of properties be in?
Mr McKissack : I think that is a decision that still needs to be made once we have the data available.
Senator RHIANNON: How regularly will the data be released?
Mr McKissack : The plan is for an annual register, so it will be released annually.
Senator RHIANNON: It is going to be released annually, so in a year's time—any idea?
Mr McKissack : I think the ATO is still compiling the data for the first report. It is still something of a work in progress as to how long it will take to produce that first report. We are aiming for something in the second half of 2017. From there on, we would expect annual updates once that data becomes available.
Senator RHIANNON: I understand that, from September 2016, the ATO is consolidating and matching quarterly data provided by the states and the ACT. What is the status of the information gathering from the states and territories, and have there been any problems in obtaining information from the states and territories?
Mr McKissack : The Land Register is being compiled using land title data from all of the states and territories. There is a financial arrangement between the Commonwealth and the states and territories to ensure that the states have resources to gather data on foreign ownership. All of the states and territories except the Northern Territory have signed up to this agreement. That data is in the process of being provided to the ATO. Obviously, various states were at various stages of preparedness to provide the data, and that is still a work in progress. But the progress has been good to date and the ATO will be able to put together that data later—
Senator RHIANNON: Are you referring to the test dataset?
Mr McKissack : I am referring to the land title data that the states collect and will be providing to the ATO once it becomes available in respect of foreign ownership.