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Kouts slugs foreign buyers in bank tax bailout

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The Weatherill Government will ramp up its tax on foreign home buyers – a revenue measure Treasurer Tom Koutsantonis has previously slammed as “xenophobic” – as it scrambles to fill in the budget black hole left by its dumped bank tax.

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The Treasurer today conceded he would be able to administratively deliver payroll tax relief – as well as maintaining stamp duty concessions and housing construction grants for off-the-plan apartments promised in his June budget – despite previously suggesting they would be scrapped if the bank tax was blocked.

The cost will be, in part, offset by a new and separate bill that will raise the Foreign Investor Surcharge also imposed in the state budget from four per cent to seven per cent – a move that will bring in an extra $36.6 million* over the forward estimates.

But the measure’s total tax take of $85.4 million over four years is still just a fraction of the doomed bank tax’s budgeted $370 million, with Koutsantonis conceding: “There’s now a hole in the budget that we have to fix.”

“I’ll be working through that,” he said, suggesting he would detail extensive savings measures in next month’s Mid-Year Budget Review.

But his slug on foreign investment – a move that emulates similar measures in the eastern states – was branded a “disgrace” by SA’s Real Estate Institute.

It’s also a measure that the Treasurer himself has formerly opposed, telling The Australian newspaper in July last year it was an eastern states  revenue grab driven by “a little bit of xenophobia”.

“It is also a recognition there are a lot of people in Southeast Asia and India who are fleeing… and they want to invest in other economies and bring their capital to Australia,” he said at the time.

“I am never going to say that I don’t want a type of investment because ‘I don’t speak your language’… I think that’s appalling.’’

But he struck a very different rhetorical tone today, declaring that “a lot of South Australians are being priced out of their own homes, out of their own suburbs, by foreign investors”.

“The very reason we’re putting in the surcharge is to stop that type of activity… we don’t want people competing with South Australians to buy a home to raise a family in,” he said.

“They’ll pay a penalty – and we hope it will have some impact on it.”

He appeared to stop himself midway through using the word “disincentive”, instead of “impact”.

But it’s a disincentive the Real Estate Institute of SA is warning of, with CEO Greg Troughton lamenting the increased surcharge was “even more xenophobic than we were before”.

“We’re either open for business or we’re not – you can’t be half pregnant,” he told InDaily.

“It’s an absolute disgrace – we don’t have the problem that’s often portrayed in the eastern states, and our state can’t afford to be knocking back anybody who wants to live and work and play here.”

Koutsantonis said the Commissioner of State Taxation would “find a way” to deliver tax relief for businesses with payrolls between $600,000 and $1.5 million, via an “administrative grant”.

“I wish we could have given them a law [but] I’ll be writing to all small businesses letting them know their payroll tax cuts are safe,” he said.

“And after the election in the first budget we’ll be legislating this again.

“I’m sorry for those SA businesses that have to go through this administrative nightmare because Steven Marshall and the Liberals blocked this measure.”

But he insisted it was no simple stop-gap, declaring the administrative solution “clumsy, clunky and awkward”.

“We gave everyone the tax cut in advance, and that turned out to be wrong [so] we have to administratively have those tax cuts put through.”

That’s despite the Treasurer previously insisting the budget goodies would be axed if the budget measures bill containing the bank tax was blocked.

In a media release earlier this month, he “revealed South Australian small businesses will receive a payroll tax increase if the Liberals block the Budget Measures Bill in parliament”, arguing businesses that had already paid a lower rate of payroll tax in anticipation of the legislation would “receive an arrears notice of up to $3,267 the next time they pay the tax, and will then have to pay up to an extra $6,533 in payroll tax over the rest of the year”.

“Mr Koutsantonis said if the Budget Bill is blocked he will personally write to every small business currently paying the reduced payroll tax rate and explain to them that because the Liberals blocked the Budget Bill they will now receive a tax increase,” the release said.

But the Treasurer today denied he had been needlessly fear-mongering about his inability to administratively pass on tax cuts, insisting “I was just telling people the truth – that if you don’t pass the tax cuts it’s not law, and I’ll have to find another way of doing this”.

The Liberal Opposition today indicated it would not prevent the foreign buyers’ surcharge bill passing through parliament, with Treasury spokesman Rob Lucas saying: “We essentially said we were prepared to let everything else go through, with the exception of the bank tax.”

He said the admission the other budget measures could proceed was a “further significant embarrassment” for Koutsantonis.

“We said all along the payroll tax cuts could be implemented administratively… this is proof positive everything he’s been saying was spectacularly wrong,” he said.

Business SA, which led the charge against the bank tax, today “commended” the Government for retaining its payroll tax concessions, with CEO Nigel McBride saying it had “done the right thing after making ill-conceived threats” to withdraw them.

“Small and medium-sized businesses are the bedrock of the SA economy, and did not deserve to be threatened by moves to withdraw payroll tax concessions in exchange for bank tax support,” McBride said in a statement.

“We welcome [the] decision to support thousands of businesses, many of them doing it tough, by ensuring they will continue to receive these important concessions.”

But Property Council state executive director Daniel Gannon lamented the foreign buyers’ slug, calling it “a cynical exercise at a time when SA needs investment”.

“Our local residential property market is not over-heating and we don’t have high levels of foreign investment… in fact, we should do everything we can right now to target more investment, not less,” he said.

“This is a cynical and populist move that will harm SA’s investment reputation, not enhance it.”

*This figure was originally reported as $26.6m, the figure quoted in the Treasurer’s media release, which was incorrect.

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