Labor has secured Greens support for its contentious tax reforms after agreeing to tighten superannuation borrowing rules, paving the way for the package to pass the Senate this week.
In a joint statement with Treasurer Jim Chalmers and Finance Minister Katy Gallagher, Prime Minister Anthony Albanese announced he had gained the support of the left-wing party following a deal to ban Australians from using self-managed superannuation funds (SMSFs) to borrow money to invest in property.
“Multiple inquiries have raised concerns that these arrangements [SMSF borrowing] raise risks for superannuation investors, including the 2014 Murray Financial System Inquiry conducted for the Coalition, and limiting new arrangements going forward will help protect people’s savings,” Albanese said.
“These arrangements constitute less than one percent of total residential property borrowing and less than half a percent of new residential borrowing each year.
“These changes don’t in any way change the tax arrangements for superannuation, don’t impact any existing SMSF borrowing arrangements and provide time to finalise arrangements that are in train.”
Those who support allowing SMSFs to borrow money to invest in property say it has enabled people to acquire investment properties they would not otherwise be able to purchase outright.
But opponents argue that enabling borrowing within superannuation may increase housing demand, putting pressure on prospective owner-occupiers.
The Greens have referred to SMSF borrowing as a “loophole” benefiting “wealthy property investors.”
Treasurer Jim Chalmers said the agreement with the Greens reflected “the realities of a Senate where nobody has the numbers on their own.”
However, the Greens have also expressed criticism of the policy they are set to support.
“We are glad that the government has listened to some of the concerns raised through the inquiry process by the Greens and experts, but Labor has again ignored young people and renters,” Greens Leader Larissa Waters said in a statement.
“Ending rather than grandfathering these tax breaks today would have helped renters get into a home of their own—but Labor is telling first homebuyers to wait because wealthy property investors haven’t made enough money off the housing crisis.”
Grandfathering will be applied to existing SMSF arrangements, while a 45-day transition period will apply for transactions in progress.
Chalmers said the change had previously been recommended by financial regulators.
“Our goal is to make sure that there are more affordable options for more people, particularly young people, to get a toehold in a housing market, which has been too difficult for too long,” he said.
Finance Minister Katy Gallagher thanked the Greens for their role in securing the legislation’s passage, saying “nothing gets done in the Senate without deep negotiations.”
“We appreciate the engagement we’ve had with all, but in particular with Greens, for securing this important motion that will pass the Senate,” she said.
Meanwhile, the Opposition Leader took aim at the deal between Labor and the Greens.
“They don’t see your savings as yours. They see it as theirs.”
