The Treasurer is floating a tax proposal that could shake the confidence of foreign investors who collectively hold close to US$5 trillion in our economy. The plan includes back-taxing foreign property investors as far back as 2006. This surprise policy shock sounds more like Donald Trump than Canberra.
Treasurer Jim Chalmers is treating foreign investors mean and hoping they will remain keen to put their money into Australia. As the Budget looms on May 12, the Treasurer will be sending a number of ideas up the political flagpole, hoping they get saluted by the powerful forces that have close to US$5 trillion in our economy right now.
Not all foreign investments are on the tax grab block, but what looks ominous for overseas property investors is this: Treasury wants to collect taxes — and back taxes — from big foreign investors who have avoided tax on property sales in the past. And what looks really draconian for long-term foreign investors is the news from the AFR’s John Kehoe that the plan is to apply a back-tax regime going back to December 12, 2006.
Undoubtedly, mining, energy and infrastructure investors in Australia will be unsettled by the prospect of taxes for deals done over the past 20 years. That’s the big shock aspect of this possible tax change, which was last tweaked in the Howard Government days in 2006.
If Chalmers gets his way, it will override two Federal Court decisions where the ATO lost out, as Kehoe tells us, to “North American mining giant Newmont and Malaysian conglomerate YTL Power, [who] did not have to pay tax on the sale of some Australian assets.”
In the YTL case, state tax laws favoured the foreign investor, and the Tax Commissioner lost the case.
The Treasurer’s New Tax Laws
- Will override any state laws that give capital gains tax exemptions.
- Will give the ATO power to pursue unpaid taxes by foreign investors.
- Will make it less profitable for foreigners to invest in Australian property-related projects.
- Will mean some projects will not go ahead, or local partners with foreign investors might have to borrow more — which will increase our foreign debt levels.
- Will not apply to local taxpayers.
Kehoe got a comment from one of the Treasurer’s offsiders, who said: “These reforms are about ensuring foreign residents pay a fair share of tax in Australia, while still providing generous concessions for investments in renewable energy.”
I don’t think many Australians disagree with foreigners paying the right amount of tax, but imposing back-taxes going back 20 years is the kind of surprise law change we have come to expect from someone like Donald J. Trump.
And while Trump and the US might get away with something like this, Australia is a small population with small savings that relies on around US$5 trillion of investment from overseas. This tax change could lead to a significant drop in foreign money flowing into Australia each year.
Any chance that Jimbo can just live within his means.
If there isn’t enough money to spend then cut the bloated public service, claw back the NDIS rorts, fix the tobacco taxand if renewables are as good as Bowen and Labor make out then stop the subsidies.
All that would be a start as opposed to making up more taxes.
All us taxpayers have to live within our means!
Peter, could you name the taxes or tariffs that Trump has imposed retrospectively as I cannot recall any?
This Treasurer has got to go. How can any investor in the future plan to invest in this country if governments can retrospectively impose these sort of taxes. This clown is damaging the future of this country and should be sacked.
He is obviously unable to bring this economy back to a reasonable debt level without taxing gthe life out of everybody and organisation that is still standing, while not being able to curb the spending of the rest of government. This whole government structure is morally bankrupt and totally devoid of innovative ideas.