A leading Australian property group has strongly criticised federal government tax changes, arguing they have stopped international investors from putting their money into Australian property.

The government in the budget doubled the withholding tax rate for international managed investment trusts (MIT), from 7.5 per cent to 15 per cent. The measure has since been approved in the Senate, with a concession for new energy efficient buildings.

Peter Frith, managing director of property and development adviser, Napier & Blakeley, said the action, with no consultation or warning, was a huge mistake and was apparently based on misguided thinking.

”It not just flies in the face of the plan to make Australia the hub of finance in Asia, but the move suddenly places Australia on the list of countries with significant ‘sovereign risk’,” he said. ”As a result, Australia is no longer considered so transparent and predictable.”

His comments followed similar remarks last month by The Trust Company, a leading property and infrastructure custodian, that the action put Australia’s status as a prime investment destination in doubt.

Mr Frith said immediately after the budget, a $1 billion investment prospect was whipped off the table. ”Since then more than $1 billion appears to have gone cold,” he said.

”Napier & Blakeley believes it is in the interests of all of the property sector to ensure we fight for clarity and transparency and ask [Treasurer] Wayne Swan to keep his mitts off the MITs.”

Napier & Blakeley’s joint managing director, Alastair Walker, said the ”MIT debacle” was raised in every meeting he attended during a recent visit to Singapore to meet clients and property advisers.

Many had raised serious concerns about the transparency of the Australian investment landscape and were considering alternative investment destinations.

Mr Walker said that in the past few years, Napier & Blakeley had provided due diligence on more than $10 billion worth of property investment transactions.

The Trust Company has been responsible for more than 30 managed investment trusts with $5 billion of direct investment in Australia since the MIT legislation was introduced in 2008.

Andrew Cannane, The Trust Company’s head of corporate client services, told Business Day from Singapore that since the budget measure, there had been a hiatus as people held off.

”I don’t think investment in Australia will dry up, but we will see less investment via the MIT structure,” he said.

Research by Colliers International found that since the government cut the WHT rate to 7.5 per cent in 2007-08, foreign investment in Australian commercial property markets rose from $1.2 billion in 2008 to $5.5 billion last year.

Written by Philip Hopkins
Displayed on the following websites – June 30, 2012
Sydney Morning Herald
WA Today
Canberra Times
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