Scott Ryan (Victoria, Liberal Party, Special Minister of State) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

This Bill continues the Government's agenda to crack down on tax avoidance.

The Bill reforms the foreign resident capital gains tax withholding regime from 1 July 2017.

By clamping down on tax avoidance by foreign investors in real estate, the Government is ensuring home ownership is more achievable for ordinary Australians, and that they have access to secure and affordable housing.

The existing foreign resident capital gains tax withholding regime, which the current Government legislated and came into effect on 1 July 2016, was designed to assist with the collection of capital gains tax liabilities owed by foreign residents, and address low levels of compliance by foreign residents with their Australian tax obligations.

This Bill will give effect to changes to the existing regime for foreign residents who sell Australian property, as announced as part of the 2017-18 Budget.

These changes involve increasing the withholding rate from 10 per cent to 12.5 per cent; as well as increasing the number of foreign residents caught by the regime, by reducing the threshold from property with a market value of $2 million or more, to property with a market value of $750,000 or more.

This will mean that from 1 July 2017, a purchaser of certain Australian property that has a market value of $750,000 (reduced from $2 million) or more must withhold 12.5 per cent (increased from 10 per cent) of the purchase price and pay it to the Tax Commissioner if they purchase the asset from a foreign resident.

These changes will improve the integrity of the existing regime by capturing more property transactions and encouraging greater compliance with Australia's tax rules

Combined with other changes announced in the 2017-18 Budget, which will ensure only Australian tax residents can access the main residence capital gains tax exemption, and will improve the integrity of the capital gains tax rules for foreign residents, the estimated gain to revenue over the forward estimates period is $570 million.

This reflects the revenue gain expected, following a small change to one of these associated changes as a result of initial targeted consultations. These other capital gains tax changes will be introduced later as part of a separate Bill, to enable consultation to occur.

The Australian Taxation Office (ATO) will be provided with an additional $19 million to assist with administering the regime. The ATO is undertaking an education campaign to help raise awareness of the changes, including presentations in major Australian cities, an online webinar and collaboration with stakeholders that assisted to raise awareness when the regime was first introduced, including the Real Estate Institute of Australia, the Australian Institute of Conveyancers, law societies, and various State and Territory regulators.

This Bill represents an important step for Australia in improving housing affordability and strengthening the integrity of Australia's tax system.

Full details of the measure are contained in the explanatory memorandum.