Property developers are railing against the Victorian government's plan to levy higher taxes on foreign buyers.
A heavy reliance on offshore debt financing means local taxpayers like Mirvac Group and Stockland are set to be caught in the crackdown.
In this week's state budget, the Victorian government unveiled a plan to increase stamp duty and land tax for foreign investors.
The changes are designed to raise about $330 million over the term of the government and address housing affordability concerns.
"The Victorian government is yet to come out with its final definition of what constitutes a foreign investor but we expect Mirvac will be caught in the net, as will all our major peers," the chief executive of Mirvac Group's development business, Brett Draffen, said.
Stockland managing director Mark Steinert said that although the Victorian government had said it was not its intention to tax Australian resident corporations and individuals, he too feared the rules would be applied in a way that inadvertently did so.
Land acquisition and property development is a capital intensive sector.
At a time when interest rates in the United States are effectively at zero and Europe has negative interest rates, it is much cheaper for Australian companies to raise debt in those larger and more liquid markets than domestically.
This means it is typical for Australia's biggest property developers to source a high proportion of their debt financing from offshore and for foreign investors to dominate their share registers.
From July 1, foreigners who are not permanent residents will be charged an additional 3 per cent surcharge on stamp duty when they buy property in Victoria.
An additional 0.5 per cent land tax surcharge will also apply to absentee property owners who are not citizens or permanent residents from 2016.
Mr Steinert slammed the notion that his company should be forced to pay higher taxes.
"Victoria's stamp duty is already high and charging us any more would be a punitive grab that can't really be justified," he said.
Mr Steinert warned that if an appropriate exemption was not reached, the developer could restrict its future investment in the state.
"Fortunately, we have a good exposure to Victoria already; this would be another reason to go elsewhere," he said.
A spokesman from the office of Victorian Treasurer Tim Pallas poured cold water on the locally listed developers' hopes for special consideration.
"In implementing the 3 per cent stamp duty surcharge, we will continue to consult with key stakeholders. There is currently no proposal to exclude or apply carve-out provisions for specific developers."
Mr Draffen said working with the state government to try to negotiate some carve-out provisions would be a focus for the property industry over the next few weeks.
"Obviously, we were disappointed the announcement in the Victorian budget was clearly not developed with the full benefit of dialogue with industry. We are now in a continuing dialogue."
Mr Draffen said that although the intention of the new taxes was to temper foreign buyers and take some of the heat out of property price rises, the move could backfire, putting more pressure on housing affordability.
"They are trying to catch foreign purchasers but not realising this will be a double tax. As a developer, if we pay more stamp duty that will be passed on to local buyers," he said.
Mr Draffen said the federal government had shown a more sophisticated understanding of the foreign capital requirements of local property developers.
He said Mirvac negotiated with the Foreign Investment Review Board each year to pay a fee of about $1 million in recognition of its high level of foreign ownership.
"I am hopeful we will be able to reach a similarly sensible agreement with the Victorian government," Mr Draffen said.
Mr Draffen and Mr Steinert were both speaking at a Macquarie Group conference in Sydney on Wednesday.
