Withholding tax could drive property trusts offshore

A key Parliamentary Committee has been told that Australia’s current withholding tax regime is acting as a direct disincentive to foreign investment.

The chief executive of the Investment and Financial Services Association, Richard Gilbert, said his organisation had conducted research that would be presented to the Government that would show Australia could add significantly to its economic capacity by adopting a more competitive tax system.

He said if the Government did not get the tax settings right, it was possible that Australia’s real estate investment trust industry would move offshore.

“If it does not move offshore in its current state, we could find that the new real estate investment trusts that we set up in this industry are not set up in Australia but are set up in centres that do have a competitive rate of tax,” Gilbert said.

Gilbert’s statement was endorsed by the Property Council of Australia’s (PCA) executive director, international capital markets division, Trevor Cooke, who said it was the PCA’s strong view that unless the Australian Government moved to reduce the withholding tax rate, the success of the sector would be put in jeopardy.

“By that we do not mean just institutions in the sense of big business,” he said.

“There is approximately $100 billion of Australian superannuation capital residing in this sector which will undoubtedly suffer if our competitiveness globally is not maintained.”