Representatives from Australia’s housing industry including the Housing Industry of Australia, the Property Council of Australia, the Urban Development Institute of Australia, as well as the SMSF Association attended a roundtable in Canberra last week with Shadow Minister for Housing and Homeless, Andrew Bragg.
“The housing industry raised significant concerns about the impact this ban will have on the supply of housing,” Burgess said.
“While SMSF investors may only comprise a small portion of new housing developments, their involvement in pre-sales is often critical to the developer securing finance. There was dismay that the Government didn’t consult or even bother to model the impact of this.”
Burgess continued that it was considered there is a strong argument to exclude new residential properties from this ban to align with the Government’s broader housing policy which draws a clear distinction between new homes, which add to the supply of housing, and existing homes.
“Concerns about inappropriate lead generation activity and high-pressure sales tactics were acknowledged and its was considered curbing this behaviour should be the focus of Government rather than introducing new rules which restrict investment choice and have an adverse impact on housing supply,” he said.
“It was noted the Government had already commenced a review of inappropriate lead generation activity.”
UDIA National President, Oscar Stanley, said extensive engagement with developers, financiers, mortgage brokers, commercial finance specialists and property professionals across Australia, has delivered a clear message that the removal of SMSF investment from the new housing market will make it harder to finance residential developments and result in fewer homes being built.
“The housing industry has spoken with one voice today,” Stanley said. “This policy will make it harder to fund new housing and will ultimately reduce supply.”
HIA Chief Executive Industry and Policy, Simon Croft, said that at a minimum, the changes should be amended to preserve the ability of SMSFs to support new housing supply, consistent with the broader objectives of increasing housing availability.
“The Government has already acknowledged that its Budget housing tax changes will reduce supply by around 35,000 homes over the next decade,” Croft said.
“It is concerning that further restrictions on private capital have been introduced without any public assessment of the additional impact on housing supply. Apartment developments rely on meeting pre-sale thresholds, and SMSF investors play a critical role in getting these projects out of the ground.”
Chief Executive of the Property Council of Australia, Mike Zorbas, said “new housing supply is king”
“Construction and capital costs already prevent new projects taking flight,” he said.
“Changes to SMSFs are the latest handbrake on investment nobody asked for at the same time as trust tax hikes suck the certainty out of new business and hiring decisions for a substantial part of the sector.”
The associations jointly noted that Treasury’s own Budget estimates show the proposed tax changes would result in fewer homes being built over the next decade. The impact will be significantly worse if SMSFs are prevented from investing in residential property.
They added that SMSF investment is critical to the viability of many new housing developments, with at least 30 per cent of apartment project pre-sales typically coming from SMSF investors.
“SMSF investment in new housing is a lynchpin for project pre-sales. Every investor helps deliver more homes for Australians. Removing this source of investment would make it even harder to get new housing projects off the ground,” they said in a statement
The peak bodies are calling on the Government to consult closely with industry on rules defining the impact of the negative gearing, CGT and SMSF changes to avoid unintended and unworkable outcomes as well as review the impact of the combined changes with a view to further fixes if the downside exceeds Treasury modelling.
Additionally, they want the Government to allow SMSFs to continue to invest in new residential housing and prioritise policies to accelerate delivery of rental housing and increase housing supply.
Senator Bragg said the Government is focused on the wrong priorities and that it is a “government for vested interests”.
“What we’ve seen is a government that has banned new housing supply from SMSFs. So SMSFs which invest in off-the-plan developments are now banned from providing new houses to Australians,” he said.
“It seems extraordinary to me that any new housing developments will be cancelled by Canberra. But that is the system we now have with the ban on SMSFs. Meanwhile, the Government is rolling out the red carpet for foreign investors. They want foreign investors to invest in housing, but apparently not Australian individuals and families, which would be, under normal circumstances, able to invest in off-the-plan new houses for Australians.”
He added that the Government has banned SMSFs from investing in property to help the major super funds.
“What it’s also doing is now bending the disclosure rules so that the super funds can invest in houses and they can cover up their stamp duty costs. The Treasurer and the Government have managed to get ASIC to make these changes to the disclosure rules, and I think it’s very fishy,” he said.
“We’ve asked the Integrity Commission to look at these issues, because it seems bizarre to me that the Government have gone out of its way to help this vested interest buy houses and cover up their stamp duty costs to members. I can’t think of any other example where a government has gone out of its way to lower the disclosure arrangements, to lower the disclosures for people, so that people can see less information about their own money.”
Example 37 of SMSFR 2009/1 provides that developer stock IS Business Real Property (‘BRP’). Unfortunately we can’t apply for a Private Ruling to confirm this but we can apply for Specific Superannuation Advice. People are focussing on the fact that it won’t be BRP once acquired but that is only relevant if you intend to lease it to a related party. Auditors have been allowing the acquisition of developer stock from related parties since the ruling came out. Anyway, you will soon have Judicial Advice to confirm it either way. I have a matter where a fund has entered into a Put & Call option over a property but contracts won’t be signed until after 10 August and we need to confirm whether the “arrangement” has already been entered into and if not is the property, being developer stock, Business Real Property.