Reduced super tax concessions to increase property prices: ASFA

A reduction in tax concessions within super could fuel increases in property prices and impact housing affordability, according to a report by the Association of Superannuation Funds of Australia (ASFA).

In a report released yesterday entitled Superannuation and the Economy, ASFA said there is ample evidence to suggest that a change in superannuation tax concessions would see a shift in behaviour in relation to voluntary contributions to super and the way in which household savings are invested.

The report argued that a reduction in the current superannuation tax concessions would likely result in lower voluntary super contributions and “increased savings in other tax preferred vehicles”.

“All policy settings equal, alternate tax preferred savings vehicles include owner occupied housing and negatively-geared investment, much of which is property,” said the report.

“This will likely fuel increases in property prices, impacting on housing affordability.”

The association said a reduction in superannuation contributions would also lead to reduced investment in the main superannuation asset classes including domestic equities and infrastructure.

ASFA chief executive Pauline Vamos said that in the past two decades, compulsory and voluntary superannuation savings have transformed the assets Australians hold.

“In 1990, Australians' savings consisted almost entirely of real estate and cash,” said Ms Vamos.

“Today, through their superannuation, Australians are investing in a diversified range of assets, including domestic and overseas equities, fixed interest, infrastructure and commercial property."

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