Government to introduce withholding tax increase as separate bill

The federal government has removed the contentious doubling of the foreign investors’ withholding tax from its planned series of budgetary changes.

Instead the government plans to reintroduce the tax increase as a separate bill in the next few days.

The tax is charged on income paid to foreign investors who invest in managed schemes, many of which fund large infrastructure and property projects in Australia.

The raising of the current rate of 7.5% to 15% was due to kick in on July 1.

Assistant Treasurer David Bradbury still expects to see the bill passed in time for the next financial year but admits that it “continues to be a matter where there is some contention”, the Australian Financial Review reports.

But he adds that the government believes there is still a “very strong case” in support of the tax increase.

“We think it is appropriate that we implement these changes,” he says.

The raising of the tax threshold has been slammed by the Property Council of Australia (PCA), developer Lend Lease and managed funds representative body the Financial Services Council over fears it will scare off foreign investors.

Yesterday the PCA criticised the decision of a House of Representatives Economics Committee backing the doubling of the withholding tax.

“By doubling our withholding tax rate, Australia reduces its ability to compete with the lower effective rates of other countries” says Property Council chief executive Peter Verwer.