<a href="https://www.apartments.com.au/developers/consolidated-properties">Consolidated Properties Group</a> (CPG) is approaching the launch of its latest Brisbane riverfront development, Castile, on the dress circle Skyring Terrace in Newstead.

VIP buyers are now being engaged, with a full public sales launch coming later this year.

Positioned as the final opportunity to secure a new absolute riverfront residence on the East bank of Newstead, Teneriffe or New Farm, Castile at 47 Skyring Terrace has been designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> as a timeless addition to the Brisbane skyline.&nbsp;

[smartcode_project:default project_id=150489 project_image_fid=371113]

The name Castile draws on themes of permanence, sophistication and legacy, reflecting a broader vision centred on enduring architecture and timelessness in the rarest of riverfront positions.&nbsp;

CPG Chairman and CEO Don O’Rorke said the project had been envisioned as a future Brisbane icon.&nbsp;

“With 47 metres of direct river frontage and never to be built out views, 47 Skyring Terrace is the definitive address on the Brisbane River,” O’Rorke said.&nbsp;

[smartcode_project:default project_id=150489 project_image_fid=371114]

“Rather than following trend-based apartment design, Castile draws inspiration from Brisbane’s great heritage buildings, reinterpreting classical architecture into a contemporary riverfront landmark designed to stand proudly for the next 100 years,” he said.&nbsp;

The approved development will comprise 227 apartments across a 25-storey tower alongside a boutique six-storey riverfront building of just 12 residences.&nbsp;

Construction is scheduled to commence in September 2026.

[smartcode_project_cta:default project_id=150489]

Joel Robinson

CPG unveils Castile Newstead ahead of upcoming sales launch

Australia’s online shopping habits have shifted dramatically over the last decade. As eCommerce volumes surged, so too did the frustrations that came with traditional parcel delivery: missed deliveries, long Post Office queues, parcel theft and the challenge of being home during business hours.

Australia Post’s Parcel Lockers emerged as one of the more practical responses to that changing consumer behaviour.

What started as a relatively niche delivery option has evolved into a nationwide network of more than 1,400 self-service Parcel Lockers positioned at train stations, shopping centres, supermarkets and Post Offices across the country. The system allows Australians to send, collect and return parcels 24 hours a day, fundamentally changing how many people interact with deliveries.

The appeal is relatively straightforward: flexibility.

Instead of waiting at home for a delivery driver or rushing to a Post Office before closing time, users can direct eligible parcels to a Parcel Locker location of their choice. Once the parcel arrives, Australia Post sends a notification with a collection code or QR access through the AusPost app, allowing customers to retrieve their package at any time within the collection window.

For apartment residents in particular, the system has become increasingly valuable.

Higher-density living has created logistical challenges around deliveries, especially in buildings without concierge services or secure parcel rooms. Missed deliveries are common, while parcel theft has become an increasing concern as online shopping volumes continue to rise.

Australia Post itself has repeatedly highlighted the growing issue of “porch pirates” during peak shopping periods, encouraging customers to use Parcel Lockers as a safer alternative to unattended home deliveries.

That security aspect is one of the key reasons the Australia Post Parcel Locker network has grown so rapidly.

Parcel Lockers are positioned as secure, monitored collection points that reduce the risk of theft while also improving delivery efficiency for Australia Post. Instead of multiple redelivery attempts, parcels can be consolidated into a single secure destination.

The Parcel Lockers themselves are free to use through a MyPost account and support a range of parcel sizes up to 16 kilograms and dimensions of approximately 35 x 44 x 61 centimetres.

Beyond receiving parcels, the system has increasingly become integrated into the broader eCommerce ecosystem.

Customers can now use Parcel Lockers to return online purchases, while retailers have embraced the model as a way to improve delivery success rates and reduce friction in the shopping process. Australia Post has actively expanded partnerships with major retailers and promoted Parcel Lockers as part of a broader out-of-home strategy.

The timing of that expansion aligns with broader changes in Australian shopping behaviour.

The acceleration of online retail during and after the pandemic placed enormous pressure on delivery infrastructure. Parcel volumes reached record highs, particularly during Black Friday and Christmas periods, with Australia Post delivering more than 100 million parcels during peak festive seasons.

That growth forced logistics providers to rethink the “last mile” of delivery, widely regarded as the most expensive and operationally difficult stage of the process.

Parcel Locker systems have increasingly been viewed as part of the long-term solution.

The concept itself is not unique to Australia. Parcel Locker networks have become common globally, particularly across Europe and Asia, where dense urban environments and apartment living create similar logistical challenges. But Australia’s geography and suburban sprawl made adoption slower initially.

Now, however, the convenience factor is driving mainstream usage.

For commuters, Parcel Lockers near train stations allow parcels to be collected on the way home from work. For apartment dwellers, they remove the uncertainty around access and missed deliveries.

The rise of the AusPost app has also streamlined the experience, centralising notifications, tracking and Parcel Locker access into a single platform. Australia Post has increasingly pushed customers toward app-based delivery management, partly as a way to combat phishing scams and fake delivery notifications, which have become more sophisticated in recent years.

The Parcel Locker model is also beginning to influence property development itself.

Parcel management has become a growing consideration in apartment building design, particularly as online shopping becomes embedded in everyday life. Many new residential developments are now incorporating dedicated parcel rooms or Parcel Locker systems into foyers and communal spaces.

For developers, parcel management is increasingly viewed as part of the broader resident amenity offering, alongside gyms, wellness spaces and communal work areas.

That reflects a wider evolution in how residential buildings are designed.

Apartment buyers are placing greater emphasis on convenience, security and operational functionality, particularly in higher-density urban environments. Parcel delivery, once considered a minor operational detail, has become an increasingly important part of that equation.

Australia Post’s Parcel Locker network sits at the centre of that behavioural shift.

What began as a simple alternative delivery option has evolved into a key piece of infrastructure supporting Australia’s growing eCommerce economy and changing urban lifestyles.

And as online shopping continues to expand, the role of Parcel Lockers is likely to become even more embedded in how Australians live, shop and receive goods.

How Australia Post Parcel Lockers changed parcel delivery convenience in Australia

Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Policy

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GUEST OBSERVATION
The Reserve Bank of Australia would dearly love to be like Dr Doolittle’s amazing pushmi-pullyu, able to face both directions at once. Cutting interest rates to encourage economic activity (and a lower dollar), but at the same time raising rates to dampen the superheated Sydney housing market. But unlike the mythical vicuna, the RBA board just cannot have it both ways.
So after being dragged to its second rate cut this year, the RBA looks like it will throw up its hands and hospital pass the housing problem to someone else – the Australian Prudential Regulation Authority.
Since late last year, the RBA and APRA have been <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2015-03-25/rba-says-too-early-to-judge-home-loan-restrictions/6346872">brainstorming</a> what could be done about the rise in investment mortgage lending, which along with foreign investors, appear to the main culprits in runaway house price increases. In December last year, the two regulators announced they had <a href="https://www.apra.gov.au/adi/Publications/Documents/141209-Letter-to-ADIs-reinforcing-sound-residential-mortgage-lending-practices.pdf">written to banks</a> reminding them they should be “prudent” about their lending practices.
In fairly benign language APRA warned bank CEOs that if banks did not pay heed they “may institute further supervisory action” and threatened such action “could include increases in the level of capital” that individual banks are required to hold.
In its Dear CEO letter, APRA also drew a line in the sand pointing out that growth in lending to property investors “materially above a threshold of 10%” will be an important risk indicator in considering the need for further action.
That particular letter must have sat in the “do after the holidays” pile because the latest figures show a 10.4% <a href="https://www.apra.gov.au/adi/Publications/Documents/MBS-March-2015.pdf">increase</a> in lending for property investment for the year to the end of March. Only the Commonwealth Bank stayed within the regulator’s guideline - just.
Market jitters
When APRA head Wayne Byres brought this <a href="https://www.smh.com.au/business/banking-and-finance/apra-keeps-macroprudential-strictures-on-bank-lending-secret-20150320-1m3nik">profligacy</a> to everyone’s attention and warned of further action, the markets got spooked and bank shares were <a href="https://www.theage.com.au/it-pro/bank-shares-wiped-out-over-apra-real-estate-crackdown-fears-20150430-1mwucx">sold off</a> by nervous investors.
But why would banks take APRA’s warnings that seriously? In an ongoing stoush resulting from APRA’s <a href="https://theconversation.com/is-the-basel-process-broken-you-can-bank-on-it-11488">cave-in</a> to the banks on the so-called Committed Liquidity Facility (CLF), it is <a href="https://www.australianbankingfinance.com/banking/the-games-we-play--part-two/">reported</a> that some of the big banks are not cooperating on the relatively simple matter of reporting which mortgages make up their Residential Mortgage Backed Securities (RMBS). Given the amount of low-risk profits banks make from investor lending (due to the magic of negative gearing) it is highly likely they would turn a deaf ear to APRA on this one.
The three little pigs (also known as the Council of Financial Regulators) may puff and blow all they like but the banks will continue to lend to property investors until the rules are changed and it becomes unprofitable. But that is another discussion.
Regulating the economy
Should APRA have any role at all in implementing economic policy?
In 2012, the RBA and APRA issued a <a href="https://www.rba.gov.au/fin-stability/resources/2012-09-map-aus-fsf/pdf/2012-09-map-aus-fsf.pdf">document</a> attempting to clarify the roles of the respective regulators – not an easy task. In obtuse regulatory speak, APRA’s role was described as: "…to promote financial system stability in Australia while balancing its objectives of financial safety and efficiency, competition, contestability and competitive neutrality."
In addition to being the supervisor of individual banks, credit unions, insurance companies and the largest superannuation firms, APRA is also what is known as the macro-prudential, systemic regulator.
APRA’s remit is to take actions to reduce so-called “systemic risk”, specifically in the case of clearing and settlement facilities, and more generally and opaquely by “limiting the systemic risks associated with breaches of financial promises”.
Does lending to property investors pose a systemic risk?
Depending on one’s position, borrowing to purchase investment properties may be a good thing (if one is benefiting from negative gearing), or bad (if one is frozen out of the housing market). However, this is an economic, tax and social issue rather than a banking one.
The question is whether this is a risk sufficient to cause a major bank to fail and bring other banks down with it.
In reality, negative gearing is as close to a risk-free profit as banks can get - after all taxpayers pick up the tab. Banks are more likely to fold as a result of other systemic risks, such as lending to iron ore producers.
The role of APRA in this issue is disquieting. Where did the 10% growth “limit” come from? [It turns out it was agreed with ASIC and RBA]. Why not 5% or 15%, what is the economic purpose of this very specific limit?
And why would shareholders not be informed of which banks are being targeted by APRA, as Byres has intimated? It is not APRA’s role to control continuous disclosure requirements, that is up to ASIC.
If the government wishes to dampen down the housing market, using banking regulators to do the hard work for it just won’t work. Banks are too far removed from the problem to be able to force meaningful change.
But more than that, banking (and other) regulators should not be used as agents of short-term government policy, they should be independent agencies warning when policies start to go wrong.
<img src="https://counter.theconversation.edu.au/content/41188/count.gif" alt="The Conversation" width="1" height="1">
<a href="https://theconversation.com/profiles/pat-mcconnell-13137">Pat McConnell</a> is Honorary Fellow, Macquarie University Applied Finance Centre at <a href="https://theconversation.com/institutions/macquarie-university">Macquarie University</a>.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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po-LsXgBTHBmX

Rates and housing risk - beware outsourcing policy to regulators: Pat McConnell

<html><body>
GUEST OBSERVATION
Treasury recently released its <a href="https://bettertax.gov.au/files/2015/03/TWP_combined-online.pdf">submission to the federal Tax White Paper</a>. It has found a tax that actually confers a benefit on Australian citizens. That is, using it actually leaves us better off.
It isn’t a new tax - it is land tax.
Unbiased economists have always known a broad based nil exemption land tax has a marginal excess burden of zero. They have continually urged government to use it ahead of every other conceivable tax instrument available.
The net benefit comes about because foreign and domestic landowners must pay it yet it is spent solely on Australians.
Or, as Treasury describes it:
"Modelling also suggests that broad-based land taxes, such as municipal rates, have a low economic cost (Chart 2.9). This is because land is immobile (unlike other capital) and cannot be moved or varied to avoid tax. The model applies this assumption to both domestic and foreign ownership of land. Land taxes paid by foreign and domestic landowners are only redistributed to the domestic households, providing a benefit to Australian households and generating a negative marginal excess burden for a broad-based land tax shown in the chart."
<a href="https://www.prosper.org.au/wp-content/uploads/2015/03/ScreenHunter_6774-Mar.-30-10.24.jpg"><img class="alignright size-medium wp-image-8881" src="https://www.prosper.org.au/wp-content/uploads/2015/03/ScreenHunter_6774-Mar.-30-10.24-494x300.jpg" alt="ScreenHunter_6774-Mar.-30-10.24" width="494" height="300"></a>
There is much unrest at the high and growing level of foreign land ownership in Australia. We have abandoned the settler compact that all political parties once held as sacred: that every Australian citizen, no matter how humble, should enjoy the freedom, independence and privacy of land ownership.
Now, the share going to first home buyers is at historic lows yet there is no let to the foreign investment in Australian property, according to a recent NAB survey:
<a href="https://www.prosper.org.au/wp-content/uploads/2015/03/NAB-foreign-buyers28.png"><img class="alignright size-full wp-image-8880" src="https://www.prosper.org.au/wp-content/uploads/2015/03/NAB-foreign-buyers28.png" alt="NAB foreign buyers28" width="434" height="274"></a>
I urge a debate on land tax, not because it takes from foreigners – although that is certainly a positive feature – but because we would be richer, more active and freer with it.
If a tax exists with a positive excess burden, we have an obligation to examine its features and shortcomings with a microscope.
The only genuine negative I have ever heard about land tax came from nobel laureate<a href="https://www.youtube.com/watch?v=yS7Jb58hcsc" target="_blank"> Milton Freidman, who observed</a>: “It’s the only tax left on the books for which people have to write a big cheque.”
David Collyer is policy director of <a href="https://www.prosper.org.au/" target="_blank">Prosper Australia</a>.
David ran as a Senate candidate for the Australian Democrats in the 2013 federal election.
This article first appeared on Prosper's website.
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dcollyer-7rQRVBSdz6

A land tax would leave Australia a lot better off: David Collyer

<html><body>
The government's claim that increasing home prices are due to an underlying imbalance in demand and supply is not true, according to a new report.
LF Economics' Housing Supply in Australia report draws a parallel between Australia's current market and the United States property market before the global financial crisis. The report's author, Lindsay David, writes that the American housing bubble was "blamed on a phantom shortage", which was proven untrue after the market crashed. Instead, writes David, there was actually a "massive oversupply of houses in the market".
"Every country that has suffered through a housing cycle in recent years had so-called experts claiming capital prices were based upon fundamental factors of supply and demand," reads the report.
"Unfortunately, economists considered these housing price booms to be efficiently based, so there was no need to actually test for a shortage – they are considered to exist by definition."
According to the report, Victoria is of "particular concern", with the greatest rise in housing prices but also the "largest cumulative oversupply of dwellings at 123,000" – three years' worth of excess supply.
<img src="/images/2015/04/22/soos-april-22-one.jpg" alt="">
The report determined that to cope with its growing population, between 1996 and 2014, Australia should have required a new dwelling for every 2.6 new residents. The LF Dwelling Supply Index compares the amount of new housing supply to the influx of new residents.
<img src="/images/2015/04/22/soos-april-22-two.jpg" alt="">
According to the report, while there have been some periods of undersupply, from 1996 to 2006, there was an oversupply of housing in Australia.
David attributes the surplus period between 2007 and 2009 to the global financial crisis, which lead to a moderation in construction while population growth increased.
"A deficit existed between 2011 and 2013, again moving into surplus as population growth has again slowed and another boom in dwelling construction has taken hold, especially in the capital city apartment markets," David writes.
"Given the uptick in dwelling completions and residential projects in the pipeline, a surplus appears likely for the next several quarters."
The report concluded that there is no connection between housing prices and the rise in home prices recorded since 1996.
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jrichardson-uRX5hFdKfN

"Housing shortage is a myth": Report

<html><body>
GUEST OBSERVATION
Achieving tax reform is often a long process as the government of the day looks for consensus before presenting proposals to the Parliament. The process that the current government is following seems to be even longer and more tortuous than most.
It doesn’t help matters when the Treasurer appears to have dismissed a number of suggestions put forward by Treasury just two weeks after the release of the discussion paper.
In his <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;db=CHAMBER;id=chamber%2Fhansardr%2F135b167f-578d-4414-a5b0-b2a35bc1cc32%2F0238;query=Id%3A%22chamber%2Fhansardr%2F135b167f-578d-4414-a5b0-b2a35bc1cc32%2F0000%22" target="_blank">2013-14 Budget Reply</a> speech incoming prime minister Tony Abbott promised to “consult with the community to produce a comprehensive white paper on tax reform. We’ll finish the job that the Henry review started and this (Labor) government squibbed.”
One would have thought that the <a href="https://taxreview.treasury.gov.au/Content/Content.aspx?doc=html/home.htm" target="_blank">2010 Henry Tax Review</a> - which sought to look forward to the next 40 years - was a comprehensive review of the tax system.
Instead, in the current process Treasury officials have gone back to basics. The long-promised white paper is still to come - the <a href="https://bettertax.gov.au/publications/discussion-paper/" target="_blank">Re:think</a> discussion paper released on 30 March is yet another consultation paper, which sets out a range of questions, but no concrete proposals.
However comments made by Hockey in an interview in the Australian Financial Review this week appears to pre-empt some of the more controversial suggestions in this discussion paper, with AFR columnist Laura Tingle writing that the treasurer “poured cold water” on any significant alteration of dividend imputation, the indexing of income tax thresholds to tackle bracket creep and on changes to the capital gains regime.
Google and ‘Netflix’ taxes
The emerging <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporate_Tax_Avoidance/Public_Hearings">evidence</a> from last week’s Senate Hearings in the Inquiry into Corporate Tax Avoidance shows the need for reform of international taxation. Although the Re:think discussion paper does raise the problem, there are no suggestions or specific questions in relation to the issues around international tax avoidance - in fact the thrust of the paper is to seek ways to encourage foreign investment.
Re:think asks the question: "Q 34. How can tax avoidance practices such as transfer pricing be addressed without imposing an excessive regulatory burden and discouraging investment?"
The treasurer has proposed a “Google tax”, modelled on the <a href="/news">UK’s diverted profits tax</a>, which was intended to counteract “contrived arrangements that exploit the permanent establishment rules”. However there are serious <a href="https://theconversation.com/experts-caution-australia-on-unilateral-google-tax-39794">concerns</a> as to whether a unilateral approach to the problem will be effective.
The discussion paper raises questions about the GST exemption for imported goods, particularly those ordered on-line. The so-called “Netflix tax” singles out multimedia downloads and is designed to address the situation where video streaming services based in Australia are required to collect GST on videos downloaded here, whereas services based overseas are not required to pay GST as the value is below the import threshold of $1,000. In the virtual world, this is a clear anomaly. The principle behind this move is worthy; but people are already working out how to circumvent the new tax.
Generally, however, broader GST reform will not be proposed unless there is consensus across political parties and the states.
There also seems to be <a href="https://www.skynews.com.au/news/top-stories/2015/03/31/shorten-open-to-top-end-super-changes" target="_blank">consensus</a> that the taxation of superannuation does need to be reformed. Even the <a href="https://www.smsfassociation.com/library/submissions/budget-submission-2015.aspx?categoryid=1375#.VSxokfBUrF">superannuation industry</a> <a href="https://www.superannuation.asn.au/media-release-1-april-2015">acknowledges</a> that the concessions are skewed to high income earners, and following the repeal of the <a href="https://theconversation.com/abbott-is-not-playing-fair-removing-super-contribution-will-hurt-working-poor-14604" target="_blank">Low Income Superannuation Contribution</a> (effective from 2017) low income earners effectively pay a higher rate of tax on superannuation than on their take-home pay.
Capital gains tax
But there are other issues raised in the discussion paper, particularly in relation to the taxation of investment income, that the treasurer has discounted before stakeholders have even drafted their submissions. "Q 19. To what extent is the rationale for the CGT discount, and the size of the discount, still appropriate?"
The 50% Capital Gains tax discount evolved from the indexation of capital gains that applied when CGT was first introduced.
It is hard to argue that a 50% discount can be justified in the current economic climate, with annual inflation running at less than 3%. Yet this week the Treasurer commented that changing the discount could restrict the flow of capital into start-ups. Although start-up companies are an important area of economic growth, it is only one investment sector.
Dividend imputation
The Discussion paper also asked: "20. To what extent does the dividend imputation system impact savings decisions?"
Dividend imputation, like superannuation and negative gearing, has popular support among the “mum and dad” investors in Australia. But there has been a global move away from dividend imputation systems, leaving Australia and NZ as the two remaining regimes.
The Henry Review <a href="https://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/Papers/Final_Report_Part_2/chapter_b2-4.htm" target="_blank">recommended</a> that: "Dividend imputation should be retained in the short to medium term, but for the longer term, consideration should be given to alternatives as part of a further consideration of company income tax arrangements."
It has increased investment in Australian companies, whether individually or through superannuation, but it is increasingly anachronistic in the modern economy. However the Treasurer wants submissions to address “how it can be improved” rather than “get rid of it”.
"21. Do the CGT and negative gearing influence savings and investment decisions, and if so,how?"
Again, the paper highlights the interaction between <a href="https://theconversation.com/explainer-why-negative-gearing-is-bad-policy-21882" target="_blank">negative gearing</a> and capital gains tax and suggests a quarantining mechanism to reduce the immediate tax benefit from negative gearing. However, although the Treasurer seemed <a href="https://www.abc.net.au/am/content/2015/s4207069.htm" target="_blank">open to discussions</a> when the paper was released two weeks ago, he told the AFR this week: "We’ve got to be very careful about constantly adjusting the policy. There is a temptation to constantly adjust policy for the volatility of the times. Now, we are in a world where that is incredibly liquid, where yields are incredibly low. That is creating perverse incentives."
But there are ways to construct reform that would not have an adverse impact on other investments.
Bracket creep
Although the <a href="https://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report" target="_blank">intergenerational report</a> and the discussion paper highlighted that the main source of revenue growth would come from bracket creep, Hockey has flagged that he does not agree with indexation of thresholds. There is some evidence to support this, as the previous experience of indexation of tax thresholds in the early 1980s contributed to inflation as wage demands increased.
However it is also clear that the government does not intend to see an increase in the personal tax rate; and has already said that the <a href="https://www.ato.gov.au/general/new-legislation/in-detail/direct-taxes/income-tax-for-individuals/temporary-budget-repair-levy/">Budget Repair Levy</a> imposed last year on incomes over $180,000 will not be extended beyond the legislated three years. Therefore the formula of the last 30 years, allowing the Government to adjust thresholds periodically, seems set to continue.
So where is the money coming from to reduce the deficit in the current budget? The suggested Bank Deposit Tax is <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2015-04-02/big-banks-warn-federal-government-against-tax-deposits/6366562">opposed </a> by the banks, who will engage in a campaign like that of the miners in relation to the Minerals Rent Resources Tax. Most of the suggestions from Treasury have been excluded by the Treasurer. The Senate has shown that it will not support further reductions in benefits and services that impact on the least well off. Most government agencies will tell you that they have been squeezed dry.
It is time for an action plan in which all of the options are on the table.
Helen Hodgson is associate professor, Curtin Law School. Curtin Business School at Curtin University.
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>. 
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hhodgson-WTYf8w7F7q

The Tax white paper - only good for fish and chips now? Helen Hodgson

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Senator Sam Dastyari has said that he is too busy to finalise the final report of the Senate inquiry into affordable housing - again.
The release of the Economics References Committee's Inquiry into Affordable Housing report has been delayed until early May.
The committee inquiry kicked off in December 2013 with the report due by June 2014.
The Senate subsequently extended the reporting date on three occasions: first to November 2014, then to the first sitting day in March 2015 and finally by today, 14 April 2015.
Yesterday Dastyari let the Senate president know he was running late with his report.
He was recently dubbed a "stuntman" by assistant treasurer, Josh Frydenberg.
"I call him the Evil Knievel of Australian politics," Frydenberg said suggesting the recent senate hearings into international corporate tax were stunt-ridden.
With submissions from the Commonwealth, state and territory governments, organisations, academics and other people known to be interested in housing, the affordability committee received 230 submissions mostly in early 2014.
"The committee is preparing a comprehensive report to address the terms of reference," Dastyari advised yesterday.
"In order to allow committee members sufficient time to consider the draft report, the committee has …... the intention of tabling its final report before 8 May 2015."
Get your homework in please Senator!
PS Property Observer gleans the final draft - some 600 pages - is being finalised by the somewhat stretched secretariat of the committee.
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jchancellor-FAypfDUnLy

Affordable housing senate inquiry report delayed for fourth time

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GUEST OBSERVATION
Rents always go up – don’t they? The 1.2 million negatively geared Australian tax payers whose property expenses exceed their rental income think so. Their cunning plan is to patiently wait while the rent ratchet turns their negative cash flows positive and net income losses into profits.
If house prices stabilise at current levels – even if they fall back for a time – overall, wages will continue to grow if only by inflation, pushing up rents. And time is on the land owner’s side.
That’s why it’s called a ratchet. Rentiers make money in their sleep or while striking alpha male poses around the BBQ.
But what if rents don’t rise?
Blasphemy! Yet the historical record shows that is exactly what happens in downturns – and rents can keep falling for years.
My pals, Paul Egan and Philip Soos produced the following chart, of both nominal and real rents Australia 1880-2012.
<img class="alignright size-medium wp-image-9199" src="https://www.prosper.org.au/wp-content/uploads/2015/04/australioan-real-rents-1880-2014B-526x300.png" alt="australioan real rents 1880-2014B" width="526" height="300">
After the 1888 boom, rents fell hard and kept falling for eight long years. In WWI, real rents fell again, while wartime inflation maintained at least nominal rental growth and rentiers’ poise. The 1929-33 depression again saw savage cuts with three years of strongly negative rent contraction. WWII was an era of rent controls to keep wages down and protect the war effort. The spike after the election of the second Menzies government and their removal in a housing shortage shows just how effective the controls were. The 1959, 1972 and 1990 recessions are clearly seen, even though rising inflation kept nominal rents rising.
I expect the legions of spruikers and yes-men employed by the FIRE sector to distract citizens from reality will find fault with my skip through the historical record.
A key theme will be that it is the nominal change in rents that matter as borrowings are in nominal dollars, and that the Australian economy is more broadly based now.
OK. Let’s look in nominal terms at Australia’s last recession in 1989-92. I have to acknowledge Australia’s extraordinary 25 years that followed without a technical recession, a world record, but the downturn really hurt residential rents.
<a href="https://www.prosper.org.au/wp-content/uploads/2015/04/australian-ABS-nominal-rents-1972-2014.png" target="_blank"><img class="alignright size-medium wp-image-9203" src="https://www.prosper.org.au/wp-content/uploads/2015/04/australian-ABS-nominal-rents-1972-2014-526x300.png" alt="australian ABS nominal rents 1972-2014" width="526" height="300"></a>
The record shows very weak rental growth from 1990 to 2006, under four per cent annually in nominal terms, while inflation consistently tracked near 3%. In fact, aside the three years 2006-09, nominal rents have been quite stodgy since 1990. The weakening trend since 2010 continues to this day.
That is a very very long time between drinks. And remember, the Australian economy was much more diversified then – we weren’t relying on iron ore and coal for export income – we even exported cars.
For every well-chosen well-located rental property that sailed through this era providing solid rent rises to absent owners, another underperformed. Never mind the continual fresh investment to update property facilities and features in a highly competitive market for quality tenants.
Real, after inflation rents 1972-2014 fluctuated around zero.
<a href="https://www.prosper.org.au/wp-content/uploads/2015/04/australian-real-rents-1972-2014.png"><img class="alignright size-medium wp-image-9205" src="https://www.prosper.org.au/wp-content/uploads/2015/04/australian-real-rents-1972-2014-526x300.png" alt="australian real rents 1972-2014" width="526" height="300"></a>
This is not the stuff of fortune-building or a secure retirement, let alone making a decent return on investment. We as a nation have gone massively into debt in pursuit of paltry returns. Nuts.
David Collyer is policy director of <a href="https://www.prosper.org.au/" target="_blank">Prosper Australia</a>.
David ran as a Senate candidate for the Australian Democrats in the 2013 federal election.
This article first appeared on Prosper's website.
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The rent ratchet mumble of the BBQ landlords: David Collyer

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The former Finance Minister Matthias Cormann wanted to repeal the Future of Financial Advice laws and deregulate financial advice. 
But the Assistant Treasurer Josh Frydenberg is planning to regulate the industry, not deregulate it.
Josh Frydenberg told Business Spectator columnist Alan Kohler: “I want to act. Financial planners should operate under the same standards as accountants and lawyers: we need to boost the professionalism and ethical standards of this industry.”
Kohler noted it follows recommendations from the Joint Parliamentary Committee led by Liberal Senator David Fawcett, but the key had been the exposure of corrupt or unethical practices led by Fairfax journalist Adele Ferguson.
Kohler writes there are two types of financial planners: sales people, mainly working for banks, that are deliberately disguised as advisers and have permanent conflicts of interest, account for 80% of the industry. Then there are the genuine independent advisers trying to help savers and retirees.
Kohler writes the banks are lobbying hard against the Fawcett recommendations, but it seems Frydenberg is not listening to them, unlike his predecessor.
 
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More regulation coming for financial planners: Josh Frydenberg

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GUEST OBSERVATION
Housing is too big an issue to be left untouched in the lead-up to the NSW state election.
After weeks of relative inactivity, there has been a succession of announcements that could affect the NSW real estate market, covering housing supply, the practices of real estate agents and the transaction costs faced by first home buyers.
While claiming to target underlying affordability issues in the housing market, these promises are designed to appeal particularly to prospective home buyers - but could actually worsen affordability.
In fact, the one policy that could make the biggest difference is one that neither side of politics is likely to touch: axing stamp duty altogether.
Meek tweaks to existing policy
NSW Premier Mike Baird made the first move, announcing that if re-elected, his government would <a href="https://www.smh.com.au/nsw/nsw-state-election-2015/nsw-election-2015-baird-pledges-hed-double-land-release-for-new-housing-20150306-13x8un" target="_blank">“supercharge” new housing supply</a> around Sydney through increased land release.
But the reality is that most of the recent and proposed Sydney-based land releases are in areas that don’t match the needs of the target home buyers, especially employment opportunities. Around 30% of lots released in the first term of the Baird government have been in the Blacktown local government area, also covering future growth sites such as Schofields. Department of Employment figures show that this area also has the <a href="https://lmip.gov.au/default.aspx?LMIP/LFR_SAFOUR/NSW_LFR_LM_byLFR_UnemploymentRate" target="_blank">highest unemployment rate</a> in Sydney at 6.3% relative to a city-wide unemployment rate of 5.3%.
Another promise from the NSW Liberals has been to <a href="https://www.dailytelegraph.com.au/news/nsw/premier-mike-baird-pledges-crackdown-on-real-estate-agents-who-underquote-no-fines-issued-since-2004/story-fni0cx12-1227251897133" target="_blank">crack down on the practice of “underquoting”</a> by real estate agents. That’s where agents advertise a property at below what the vendor would reasonably accept, thereby boosting the pool of potential buyers who turn up to an auction.
Underquoting already attracts a fine of $22,000 in NSW, yet is poorly detected. It has been more than 10 years since a fine for underquoting was issued in NSW. Echoing promises made by Denis Napthine prior to his loss at the Victorian state election in late 2014, the Baird government has promised to target loopholes that permit agents to get away with underquoting, increase the penalty and possibly cancel agents’ licences.
For their part, Labor’s Luke Foley has <a href="https://www.smh.com.au/nsw/luke-foley-raises--stamp-duty-overhaul-during-second-election-debate-20150308-13ydxz" target="_blank">proposed</a> a policy that would allow first home owners to pay their stamp duty over five years instead of within three months of the property purchase.
Critics of NSW Labor’s plan question whether it really does help first home buyers to defer payments that will accrue interest in line with inflation.
And by removing this upfront cost, there is additional spending money available in the property search. Essentially, the Labor policy boosts demand in the short term at the longer term expense of first home buyers who will face increased repayment stress.
In fact, a more meaningful and positive impact on the entire housing market could be achieved through scrapping stamp duty on property transfers altogether.
Stamping out stamp duty
<a href="https://www.osr.nsw.gov.au/taxes/transfer-land/about" target="_blank">Stamp duty is a transaction tax</a>, and a significant one in real estate transactions in Sydney. Latest <a href="https://www.corelogic.com.au/research/monthly-indices" target="_blank">CoreLogic RP Data figures</a> show the median house price in Sydney is now over $900,000. On these numbers, a house selling at the median price in Sydney would attract a stamp duty bill of more than $35,000.
Transaction taxes affect all trading behaviour, but the impact is magnified in housing markets. The sheer size of looming stamp duty bills can limit opportunities for people to move house, locking them into a single property. This often hits hardest those in most need of relocation, like people whose living arrangements have changed because of divorce or who need to move for work.
Stamp duty also acts as a drag on the broader economy by restricting the efficiency of property prices, property supply and even labour mobility.
Why is the government too shy to touch stamp duty?
Put simply, the NSW government is addicted to stamp duty.
Current Minister for Planning, and former Minister for Community Services (under which other agencies such as NSW Housing sit), <a href="https://www.smh.com.au/act-news/goulburns-pru-goward-braces-for-a-huge-hit-at-nsw-poll-20150309-13yvw6" target="_blank">Pru Goward describes the situation perfectly</a>: "…We have a housing boom that of course is generating tremendous stamp duty revenue, so our revenue is back in the black and that has enabled us to make spending commitments that we otherwise would not be able to do."
NSW raised <a href="https://www.smh.com.au/nsw/stamp-duty-surge-bumps-nsw-surplus-to-12-billion-20141028-11czfw" target="_blank">more than $1 billion through stamp duty last year</a>. That is a very hard source of revenue for any government to let go of. Unfortunately for voters, it’s also incredibly inefficient.
The Henry Tax review <a href="https://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/Papers/Final_Report_Part_2/chapter_c2-4.htm" target="_blank">recommended switching away from stamp duty</a> to broad-based taxes, such as consumption tax or even land taxes. <a href="https://www.cpaaustralia.com.au/professional-resources/taxation/tax-reform-in-australia" target="_blank">CPA Australia</a> recommended something similar. The success of this switch would require cooperation between different levels of government.
More carrot, less stick
But is there a solution in the middle? A key flaw to Foley’s proposal is that it increases demand and is expected to further push up prices. Rather than incentivise first home owners to buy, why not offer an incentive for prospective sellers to put their property on the market?
The “empty nesters”, for example, now nearing retirement and with little need for the family home may be interested in downsizing to a smaller, more manageable property. Stamp duty is a cost that currently creates a disincentive for them to move.
Take away the stamp duty and the government could help create a more efficient housing market where home buyers have access to the right property for their needs.
<img src="https://counter.theconversation.edu.au/content/38536/count.gif" alt="The Conversation" width="1" height="1">Danika Wright is lecturer in finance at University of Sydney.
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>.
{mijopolls 97} 
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Killing off stamp duty - a good policy that no politician supports: Danika Wright

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To date the No Land Tax political party has only been evident with bright yellow campaign signs on roadside telegraph poles, but that has all changed as the single issue party as won the coveted first spot on the ballot paper for Legislative Council election.
The No Land Tax party drew position A, giving it a reasonable chance of getting its candidate elected. It is running 93 lower house candidates which ought generate assistance for the upper house prospect.
<a href="https://www.nolandtax.com.au/" target="_blank">The party</a> wants a full restructuring of the state's taxation system, including land tax, stamp duty and payroll tax.
A total of 24 groups are contesting the Upper House election. No Land Tax has 16 candidates on its upper house list.
Candidate Peter Jones hopes land tax can be abolished just like death duties were in 1981.
Land tax is levied on investment residential and commercial property and holiday homes in NSW regardless of the income generated by the property. 
The party's website says over 150,000 people are hit with land tax every year in NSW. 
"There is no equivalent tax on share investors," it notes.
"With high property prices in Sydney and NSW, it’s not difficult to be dragged into paying land tax.
"Land tax is calculated on the 'highest permissible use' of the property, so for example, a warehouse that has been rezoned for residential development is taxed at the higher valuation, even if the warehouse tenant has a long term lease.
"It is not uncommon for some property investors to pay more in land tax than they receive in rent."
In 2003 the NSW government collected over $1.1 billion in land tax. The figure is almost $2.4 billion now and it is expected to increase to almost $3 billion by 2017.
Over the years Peter Jones has caught the attention of Fairfax and News Ltd journalists, with 2GB broadcaster Ray Hadley suggesting the party was an interesting invention that would secure plenty of colourful coverage.
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No Land Tax party puts the $2.4 billion issue atop the NSW election agenda

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GUEST OBSERVATION
Home ownership is an important protection against poverty in retirement, and it has been suggested superannuation should be accessible to fund a deposit to help people enter the property market.
Proponents of such a scheme point to the Canadian and New Zealand models, which allow withdrawals to purchase property. These comparisons need to be made carefully.
The Canadian retirement income model does not require mandatory superannuation, and HSBC reports that currently about half of Canadians do not contribute to a Registered Retirement Savings Plan. In the case of New Zealand, the NZ Kiwisaver is a relatively new retirement savings plan, and the default rate of contributions is 3% compared to 9.5% in Australia.
There are two reasons why withdrawing superannuation for a home deposit can be counterproductive.
Firstly, the property market is unregulated and the current housing boom is a direct result of competition for a scarce resource. If first home buyers are allowed to withdraw from superannuation funds, the effect would be to increase competition, thus driving prices up further. This was the effect of the first home stamp duty subsidies that were available over the last decade.
Secondly, accessing superannuation balances would negate the effect of compounding returns over the years to retirement. The average balance of an Australian aged 30 to 34 years in 2011-12 was A$27,772. The Canadian model allows a person and their partner to each withdraw C$25,000 from their superannuation, repaying it over 15 years. If adopted here, this would effectively wipe out the superannuation balance of each of them and would still be less than 10% of the median house price in the major Australian cities. Repayments would need to be in addition to mandatory contributions, and after mandatory contributions, HECS repayments and mortgage repayment, this could result in financial distress for borrowers.
Capital growth could give some protection from lower superannuation balances, but in the context of the family home, the gain would not be realised until the owner(s) downsized, as the usual pattern of home ownership is to sell and repurchase in the same market.
Despite widespread discussion about the proposal, government representatives have said they have “no plans” to change the rules on accessing super.
Lack of reform
The superannuation system is linked to both taxation and the pension system, but since 2007 it has been effectively quarantined from reform.
Contributions and investment earnings in a complying, taxed, superannuation fund are taxed at 15%. Withdrawals are also taxed at reduced rates, and since 2007 have been tax exempt for persons over the age of 60.
Conceptually superannuation is a form of long-term savings that displaces other forms of savings and, according to the ABS is the major financial investment held by most Australians. Our superannuation system is mandatory for employees, so employees earning more than A$450 per month have no choice as to whether they will save through superannuation.
The legal requirement is placed on the employer, but the economic reality is that superannuation is imposed on employees: it is reflected in the take-home pay of employees, notwithstanding the 1987 trade-off between award wages and superannuation.
In the case of a high income earner, the 15% tax rate on superannuation encourages savings into superannuation. However, low income earners who pay income tax rates less than 15% find that most of their savings are locked up in superannuation without any tax concessions. This affects their ability to save for a deposit on a house, or to have funds available in an emergency.
Superannuation and tax incentives
The Henry Review considered the problem of investment bias, although the government excluded tax exempt payments to persons over 60 from the terms of reference. It identified a clear incentive for a high income earner to put money into superannuation, displacing other investment, and a disincentive for low income earners.
Contribution caps limit the amount that can be contributed in superannuation that can subsequently be withdrawn tax free. However they are much higher than the SGC rate giving room for a high income earner to divert savings into superannuation: at the current mandated SGC level of 9.5%, a person would have to earn over A$300,000 pa to breach the non-concessional cap. A member can also contribute up to A$180,000 pa of non-concessional (tax paid) contributions. The tax benefit is that income earned by the superannuation fund on that investment is also taxed at 15% instead of the member’s marginal tax rate. In a self managed superannuation fund the member can then direct the investment strategy personally while taking advantage of the tax shelter.
Since 2013 contributions by very high income earners have been taxed at 30%, but the threshold of A$300,000 (including superannuation) ensures this only applies to a minority of taxpayers.
Balancing super and the pension
The balance between superannuation and the Age Pension is critical to funding retirement income. The mandatory superannuation system was proposed as a means of supplementing, not replacing the pension, and the 2015 Intergenerational Report predicts that by 2055 spending on the Age Pension will be at similar levels to now, but higher numbers of pensioners will be receiving a part pension. In 2011-2012 the average superannuation balance at retirement was A$197,000 for males and A$105,000 for women. Although it is increasing most retirees will at some stage need some support from the Age Pension.
Retirees can game the system by taking substantial tax exempt lump sums remaining eligible for higher rates of pension. When a superannuation fund goes into pension phase, the member is required to withdraw a minimum amount, based on the age of the retiree, but there is no cap. The Murray Report echoed the Henry Review when it again recommended the development of more comprehensive income based retirement products.
While superannuation balances generally are low, lump sum withdrawals can be ascribed to paying down debt and transition to retirement costs, and there is a growing concern that people approaching retirement take on additional debt in the expectation that they will be able to pay it off when they receive their superannuation.
The tax exempt status of superannuation pensions is a more pressing concern. When the member retires and a superannuation fund goes into pension phase both the income of the fund and the amount paid to the recipient are exempt from income tax. In the 2014 year this cost the budget bottom line A$16.3b in foregone revenue and was the 3rd highest tax expenditure. It is difficult to see how this tax expenditure can be maintained indefinitely.
Where to from here?
The fiscal risk inherent in the superannuation system is clear, as highlighted in the Intergenerational Report and the Murray Report.
The options for reform include equalising tax rates across the accumulation and pension phase of superannuation; imposing tax on superannuation accounts with a high balance; taxing contributions by applying a rebate to the member’s marginal rate of tax; lifetime caps on non-concessional contributions to superannuation funds;and making a regular income stream more attractive than lump sums.
The political issue is that governments are not willing to propose reforms that will impact on the current generation of retirees, and continue to quarantine the retirement system from serious review. Until we can openly talk about the lack of sustainability in the retirement income system, we will continue to impose a fiscal burden on future generations.
<img src="https://counter.theconversation.edu.au/content/38165/count.gif" alt="The Conversation" width="1" height="1">Helen Hodgson is associate professor at Curtin Law School, Curtin Business School at Curtin University.
This article was originally published on <a href="https://theconversation.com">The Conversation</a>.
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