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News release

Federal Budget removes the welcome mat for offshore investors in Australia’s commercial real estate market

Second year in a row that the Federal Budget  misses the mark


AUSTRALIA, 9 MAY 2012 –  This year’s Federal Budget is another tale of missed opportunity and is broadly negative for the commercial property industry.
 
It is disappointing to note that, as in last year’s budget, opportunities for broad ranging reform of the taxation system and state/Federal funding have once again been sidelined.
 
Stephen Conry, CEO, Jones Lang LaSalle Australia said, “The announcement of a doubling of the withholding tax that foreign investors pay on income from Australian managed funds is a blow to the commercial property industry.
 
“The Government had previously made significant moves by slashing the withholding tax progressively down to 7.5%. 
 
“To now double the withholding tax back to 15% and the abolition of the CGT discount for non-residents appears to be removing the welcome mat for offshore investors.
 
“This is disappointing and unfortunate at a time when Australia is a preferred destination for many offshore investors in the domestic real estate market.
 
“Similarly, business is also a big loser out of this budget.  We need business to prosper with the government fostering an environment of creating more wealth, not just how to share it.
 
“The decision not to proceed with the previously announced company tax cut is a disincentive to business at a time when it needs more incentive.
 
“It also sends a mixed signal to Asian investors and trading partners who typically operate in jurisdictions where tax rates are lower.
 
“The infrastructure initiatives announced are welcomed but there needs to be much more infrastructure planning and investment for the years ahead.
 
“The Government has scrapped the $1 billion Tax Breaks for Green Buildings program, which is a big set back for the property industry. The scheme would have encouraged  green retrofitting of buildings and was due to commence on 1 July 2012. 

“Whether or not the forecast surplus for 2013 is achieved, restraint on government spending is broadly positive for the economy and therefore also for the real estate sector.
“We are concerned that the price of next year’s surplus is at the cost of increasing this year’s defecit given the family payments timing.
 
“Local and offshore investors will also note as a positive the assumptions of accelerating economic  growth over the next twelve months, and a further reduction in interest rates, that are built into the budget arithmetic.
 
“The strategy of running a tight fiscal policy while encouraging the Reserve Bank to reduce interest rates is generally positive for real estate investment and construction,” Mr Conry concluded.

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