In a bid to stimulate construction and attract foreign investment, Queensland’s Liberal National Party (LNP) government has announced an expansion of tax breaks for foreign property investors. This decision comes less than a week after the state introduced draft laws allowing developers to make political donations in state elections.
Treasurer David Janetzki unveiled the policy changes during a mid-financial year budget update on Monday, revealing that the state’s operating balance has fallen nearly $400 million further into deficit since the government’s first budget in June. The updated policy aims to broaden eligibility and expedite processing for foreign investors seeking exemptions from additional stamp duty and land tax charges.
Key Changes to Tax Breaks
The new measures, which take effect immediately, include reducing the number of homes required to qualify for tax exemptions from 50 to 20. This adjustment is expected to make Queensland a more appealing destination for development and investment.
Additionally, the eligibility criteria for corporate groups and other entities involved in property development will be expanded. “We are ensuring Queensland remains a competitive and attractive destination for development and investment through delivering a clear message that Queensland is open for business,” Janetzki stated.
Impact on Housing and Economy
According to the Property Council of Australia, the foreign tax scheme has resulted in Queensland missing out on nearly 32,000 homes valued at $17.8 billion since its inception in 2016. Jess Caire, the council’s state executive director, emphasized that the taxes have disproportionately affected Australian-based developers and owners who are crucial to meeting the state’s housing needs.
“Most alarmingly, the international taxpayers that have borne the brunt of these taxes are not foreign buyers looking to crowd Queenslanders out of housing but are in fact Australian-based developers and owners who build the houses Queensland needs,” Caire said.
Meanwhile, the government has also announced a doubling of its “boost to buy” shared equity scheme to $330 million, aimed at assisting 2,000 aspiring homebuyers with up to a 30 percent equity contribution from the state.
Budgetary Challenges and Future Outlook
The expanded tax breaks come amidst a downgraded budget outlook, primarily due to $345 million in additional concessions granted to public sector workers, including nurses and police. This financial strain is compounded by new spending initiatives totaling $478 million, such as industry support in the state’s north-west and infrastructure for the racing industry.
The projected net operating deficit for 2025-26 now stands at $8.96 billion, up from the $8.58 billion forecast in the budget. However, this has been partially offset by a 2.1 percent increase in tax revenue, driven by surging property prices and higher-than-expected inflation and wage growth.
Higher than previously forecast inflation and wages growth, leading to higher payroll tax projections, has led the government to lift its expected tax take over the three years to 2028-29 by $1.08 billion, or 1.2 percent.
Political and Economic Implications
The announcement of expanded tax breaks for foreign investors is likely to spark debate over the balance between attracting investment and maintaining fiscal responsibility. As Queensland grapples with a growing deficit, the effectiveness of these measures in stimulating the economy and addressing housing shortages will be closely scrutinized.
Looking ahead, Treasurer Janetzki has indicated that he will monitor the impact of these changes and consider further adjustments in the next budget if necessary. The government’s approach will be pivotal in shaping Queensland’s economic landscape and addressing the challenges of housing affordability and fiscal sustainability.
