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Australia may lock foreigners out of property tax scheme

Xinhua, June 29, 2015 Adjust font size:

Australia may restrict a property tax scheme to only its citizens after it was revealed on Monday that foreign investors dodged close to 60 million U.S. dollars in tax in 2013.

Australian Tax Office data showed almost half of the country's 52,670 foreign investors that declared rental income in 2012-13, the latest figures available, claimed a loss, mostly through negative gearing, News Corp reported on Monday.

Negative gearing allows landlords to offset the cost of their investment property, such as maintenance, agent fees and interest on mortgages, against the income received from rent.

It has been blamed for handing the advantage to higher-income earners and pricing lower-income earners out of the property markets in Sydney and Melbourne, where house prices are sky- rocketing.

The government, fearing voter backlash from the 1.27 million Australians using the system, has been loath to change the system completely, but is investigating a move on restricting or abolishing the system's use for overseas investors.

By using negative gearing, foreign investors in 2012-13 reduced their tax bill by 73 percent, saving 57.75 million U.S. dollars.

"Negative gearing by non-residents is under active consideration as part of the Tax White Paper process," a spokesperson for Treasurer Joe Hockey told News Corp on Monday.

The impact of the scheme on the nation's bottom line is compounded by the speed at which foreign investment is growing. From 2012-13 to 2013-14, overseas investment doubled to 26.2 billion U.S. dollars.

Taxation policy specialists will investigate the potential impact of changing the rules on foreign investment, which is considered crucial to fueling housing construction in the country.

Many investors buy new Australian dwellings "off-the-plan".

Industry experts estimate negative gearing costs the economy 3. 85 billion U.S. dollars in lost revenue annually.

Of those using the system, 13 percent declared an income of less than 15,400 U.S. dollars in 2012-13. Endi