Budget 2016: What tougher super laws mean for the property market

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Numerous measures included in last night’s budget are set to have a significant impact on the Australian property market and investment sector.

Changes to company tax rates for small businesses will provide a boost for the residential construction sector, while the retention of existing negative gearing arrangements and alterations to allowable superannuation contributions and their taxation arrangements could result in property becoming a more attractive investment class.

While much of the discussion in the lead up to the announcement centred on investors leaving property if negative gearing was touched, it appears the opposite could occur after the Government clamped down on superannuation arrangements.

Treasurer Scott Morrison announced that the amount of post-tax earnings that can be placed into superannuation accounts will be capped at $500,000, while capital above $1.6m in super accounts will face a 15% pension tax.

Speaking at a NAB post-budget breakfast, economic commentator Robert Gottliebsen said those changes mean alternative saving strategies, such as negatively geared properties, are likely to become more popular.

“If you haven’t got the money in superannuation [already], then you’re not going to get it in,” Gottliebsen said.

“You’re going to have to adopt a different savings strategy,” he said.

Alice Kase, partner at ‎PricewaterhouseCoopers, agreed with Gottliebsen and said the governemnt was sending a clear message with their announcements on super.

“What the government is really telling us is that they’re reinforcing the message that super is not an estate planning tool and it’s no longer a wealth accumulation tool,” Kase said at the NAB breakfast.

“The big change is the $500,000 lifetime limit… I think we’ll see a redirection of savings mechanisms through the use of trusts and negative gearing,” she said.

Graham Wolfe, Housing Industry Association (HIA) chief executive for industry policy, said the budget means the residential construction industry will continue to play an economic role.

“The Budget will help maintain the residential building industry’s capacity to make a significant contribution to employment and economic activity,” Wolfe said.

“The reduction in the company tax rate, its immediate extension to businesses with turnovers up to $10 million and the continuation of the $20,000 asset write-off program will also help the small businesses that dominate the residential construction industry, to grow their employment and investment,” he said.

Wolfe also praised the government for their focus on infrastructure, believing it will lead to improved delivery and a have a positive effect on housing affordability.

“The Budget measures to support new approaches to funding the essential infrastructure that our cities need to grow have the potential to unlock fresh opportunities for home buyers and improve housing affordability,” he said.

Real Estate Institute of Australia president Neville Sanders said the government’s decision to leave negative gearing alone will go a long way to help Australia meet housing supply needs.

“The boost to infrastructure spending, the extension of small business concessions, modest tax cuts and the retention of the current arrangements for taxation of property investments will help ensure that the property sector remains an important driver of economic growth,” Sanders said.

“We are pleased that the Treasurer in his Budget Speech reiterated that the Government will not remove or limit negative gearing or change the capital gains tax as this would increase the tax burden on Australians trying to provide a future for their families,” he said.

This recognises that the current arrangements increase the supply of housing for our growing population, keep rents affordable and eases the burden on social housing.”

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