Meet Josh Chye: The go-to guide for foreign investors navigating Australia’s real estate market

Josh Chye of HLB helps clients entering the Australian market for the first time to negotiate the country’s tax system and legal environment

When Josh Chye, the head of tax consulting for advisory and accounting firm HLB in Melbourne, meets with a new business client to discuss their plans for entering Australia, he typically shows them two slides.

The first outlines all the different types of taxes they will face in Australia, including stamp duties, land taxes, goods and services taxes, and income taxes. Chye says he likes to compare Australia with its neighbours in Asia-Pacific—his clients include major developers from Singapore, Hong Kong, Malaysia, and elsewhere—to show them upfront that their tax rates in Australia are likely to be considerably higher than what they were accustomed to back home.

“I don’t do that to try and scare them, but to highlight some of the reasons they want to come to Australia in the first place,” he says. “We are a safe, certain, and mature market, and there’s a level of tax that comes with that.”

Then he shows them a second slide spotlighting the various concessions that can help them to minimise or offset their tax burden. For instance, overseas companies that build housing stock in Australia can take advantage of concessions on land tax duties. Chye proposes long-term tax strategies for his clients, showing them in this second slide what that structure looks like.

“It’s a well-trodden path to come into Australia for property development,” he says. “We’ve got some of the largest developers in the region here. We like to give our new clients that level of awareness, educate them, and then build a strategy for moving forward. But it is vital to get them set up properly from day one.”

Chye was in Bangkok, Thailand in December for the annual PropertyGuru Asia Real Estate Summit. In between sessions on AI’s impact on the real estate industry, the latest in sustainable development trends, and the future of smart cities, he took some time out for a chat.

“It’s an action-packed agenda,” he says of the summit. “I think the organisers do a really good job of giving busy people the opportunity to learn as much as they can from different perspectives, including from best-in-class speakers from around the world.”

He particularly enjoyed the focus on sustainability. “Returns ultimately come in many forms—not just financial,” he says.

“And it’s refreshing to be part of a community that aligns with that philosophy.”

What were some highlights of the PropertyGuru summit?

AI was a big topic this year, not surprisingly, discussing how people can use it to inform planning and decision-making, and how it can help operations from a business perspective.

Another focus was the social impact of housing and how we need to design more beautiful spaces, and also be more socially conscious. It’s helpful to learn about these perspectives from architects and others. The concept of smart cities—and how new technology is going to be designed and delivered—was also interesting. There was also a lot of talk about the aspects of sustainability in development, which is very important.

AI is making a lot of news these days. Has it had much impact on your work in tax advising?

I think AI will help us to deliver more valuable advice and get to solutions more quickly. If you ask AI a question, it typically gives you the most common denominator for an answer. But our job is to tailor our advice specifically for each client. So, AI can help us streamline processes and give us some starting points, and it enables us to find information more quickly, which is valuable. But for now, we only use it to handle basic tasks more efficiently and assist certain elements of our workflow that don’t require complex thought processes.

What is a typical process of advising companies that are entering Australia?

First and foremost, we want to talk with our clients about their commercial objectives. We spend time educating them about different taxes so they’re aware of all tax planning that should be considered. In Australia, once you sign a contract to buy a property, it’s hard to restructure it into a different entity without incurring significant time and cost. There are a lot of developers who focus exclusively on getting a deal done—and figure they can restructure it later. But at that point, they often learn there are a lot of additional costs involved in restructuring, particularly what we call stamp duty or landholder duty. This can be very expensive.

The good thing about Australia is it’s a very mature legal environment, which is great if you are advised from the start. It can be quite seamless. But it is very problematic if you aren’t aware of that, and you make certain assumptions. There are certain parts of the tax law that are not commonly known unless you get advice.

So, we try and help clients understand how to set up the right structure or tax strategy before they fund in Australia. And then we help them set up those entities, along with their lawyers, and help set up contractual arrangements to maintain those entities. This lets us follow through on the overall tax plan to minimise the impacts. The goal is to be part of their extended team, long-term, in Australia. If we do a good job—we help educate them, and set up what we’ve structured for them—then we don’t just create entities but help maintain them all the way through.

A lot of the challenge is summarising complex or different perspectives to a new entrant, so they understand or learn about all the unique parts of Australian tax law

What do you like best about the work?

What I like best is leveraging my technical and industry expertise—on tax, which isn’t always the sexiest topic—to ultimately build a relationship with our clients where we’re always learning from each other. I leverage my expertise and my firm’s broader scope of services to help them quickly get where they want to be, as one of their trusted advisors or business partners.

What are the biggest challenges in providing tax advice to companies entering Australia?

Australia has certain unique aspects that aren’t common around the world. So, for example, trusts are a common and legitimate type of entity in Australia. But this is often not well known elsewhere in Asia Pacific, for example, and can be seen as an aggressive or contrived arrangement.

A lot of the challenge is summarising complex or different perspectives to a new entrant, so they understand or learn about all the unique parts of Australian tax law. Often, they come from a lower tax jurisdiction, so they’re already a bit nervous about the headline rates in Australia. They might feel that back home they would structure things using a certain strategy, and they sometimes might think they should: “Buy first, do it later.” Whereas in Australia, you should always do it the other way around.

Building trust with clients upfront is critically important. And that’s the biggest challenge for me. That’s why coming to a place like PropertyGuru, or being part of HLB’s global network, is valuable. Because if we work with people who refer one another, or who have relationships with developers, it significantly improves our chances of helping them understand that we’re supporting their best interests, whether it’s us directly or through our collaborators.

What are the biggest challenges specifically in Australia’s property market right now?

Right now, it’s housing supply. It’s a big destination for migrants and that requires housing. So the government is focused on helping deliver more stock to people who need it. It is targeting building 1.2 million homes over the next five years, which in a population of about 22 million is significant. That would average 240,000 dwellings a year. But the most we’ve ever done previously in one year was 220,000 in 2017. The government faces the challenge of implementing the biggest housing reform and incentive plan the country has seen for a long time.

Typically, developers often build to sell, but Australia is now trying to move toward build-to-rent. It’s a way to grow housing stock. The idea is very mature in the US and Europe. It’s still relatively new in Australia, but taxes are now available, and this potentially supports large institutional capital from overseas if they put money in to help Australia build up its housing stock.

The original version of this article appeared in PropertyGuru Property Report Magazine Issue No. 182 on issuu and Magzter. Write to our editors at [email protected].