Fears emerge of a rush to the property market by wealthy Australians hit by new super rules

FEARS of a rush to investment property by wealthy Australians hit by new super rules have everyday workers fearing they will never get into the market.

Would-be first home owners are bracing for an even more heated battle to buy. Picture: Andrew Tauber

AT FIRST glance, Treasurer Scott Morrison’s first Federal Budget appears to be tough on the wealthy, with sweeteners for middle income earners.

The biggest changes to superannuation in years mean the super rich will no longer be able to plough millions of tax-free dollars into retirement accounts, and those using shady offshore structures to hide their cash will be slugged with a 40 per cent penalty tax. Taxation changes will put $316 a year back into the pockets of those earning $80,001 to 87,001.

But for everyday workers whose biggest concern — housing affordability — was not addressed in the Budget, things could soon become even worse.

There are fears that the rich hit by the new super rules will simply plough their money into investment properties in greater numbers than ever.

And, as every frustrated househunter knows, it’s these investors who have put the heat into capital city markets, pricing out first home buyers from even far-flung outer suburban properties.

While high-income earners and wealthy retirees ring their accountants for advice on how to restructure their affairs, those still dreaming of home ownership will be wringing their hands in frustration.

We caught up with the news.com.au readers who shared their hopes of the Budget.

Leena Thavisin and Mark Silberer are worried about housing affordability.

‘PRIORITIES OUT OF ORDER’

Melbourne’s Leena Thavisin and Mark Silberer were unimpressed by a Budget that did little to address their biggest concerns.

The professional couple, aged in their early 30s, want to buy their own home in the next few years, but are worried that they will not be able to afford to do so.

Despite some bright spots for middle income earners, he said, “there is nothing to address housing affordability”.

“Prime Minister Malcolm Turnbull said ‘we didn’t want to penalise those people who are just looking to invest’,” Mr Silberer said.

“That’s all well and good, but the people looking to invest already have a home. I would have thought the focus would be to get people into a home. It just seems the priorities were a bit out of order.”

He hoped the Victorian Government’s decision last month to hike stamp duty for foreign investors would help stabilise the Melbourne market.

Mr Silberer said negative gearing reforms “would have netted the government more money to play with and help out the other losers in the Budget”.

“It was disappointing to see an increase in Defence, whereas university students are going to cop it,” he said.

LUCKY TO GET IN EARLY

Sarah and her husband Dan with their daughters Ella and Sophie.

Like many Australians, there wasn’t much in the Budget that caught the attention of Sydney lawyer and mother Sarah, 44.

While she has not scrutinised the Budget closely, it mostly confirmed what she was already expecting about education funding, which was her main concern.

The government has promised $1.2 billion in extra funding, short of the $4.5 billion Labor has said it would provide to deliver the Gonski school funding model.

“More money is better than less,” she said, adding it would be good to know how the money would be distributed.

At 44 years of age, Sarah has only just finished paying for her university education and so she’s also worried about the potential for higher fees.

“Particularly for women, it’s going to be very detrimental because it takes longer to pay back. We need to be encouraging people to contribute to the economy,” said the mother of twin daughters aged 10.

While Sarah owns a home in Croydon with her husband Dan, an IT worker, she has many friends who are struggling to do the same.

“It was just a matter of timing, I think if you tried to buy after 2005 it was really a struggle, especially for those coming back from overseas, they just missed out,” she said.

“I don’t know what the answer is, I’ve got property so I don’t want it to devalue but I want people to be able to get into the market.

“Not being able to do so, increases the disparity between rich and poor.”

Michelle Nicol is not convinced the Budget will benefit her.

STOP THE ‘SUPER RORT’

Melbourne digital marketing consultant Michelle Nicol, 52, said targeting the use of offshore tax havens “sounds like a good idea, but we’re yet to see whether it will be effective”.

Ms Nicol welcomed the changes to superannuation that would stop the super wealthy from locking millions of dollars away in tax-free retirement accounts.

The measure includes capping the total amount that can be drawn on as a tax-free pension at $1.6 million.

“Yes it’s a good thing that the top end of super can’t be rorted, that seems on the face of it to be good,” Ms Nicol said.

“I would be interested to see how many people that will affect. The average worker is not going to make $1.6 billion in super contributions.”

And, she argued, the amount would not be enough for many Australians to retire on.

Mr Morrison said in his Budget speech that the amount represented about four times the aged pension.

For a single woman, that means $82,659.21 a year over 19 years and four months. She would have to keep working full time until a few months before her 70th birthday, and the money would run out by age 87.

The Budget also reduces the amount of annual voluntary super contributions that can be made at the concessional 15 per cent tax rate to $25,000; lowers the income threshold before the 30 per cent rate is imposed to $250,000; and imposes a $500,000 lifetime cap on non-concessional contributions.

But Ms Nicol said the figures only illustrated how drastically the financial affairs of the elite diverged from those of ordinary Australians.

“Basically there’s never been a more exciting time to be an old white male millionaire — unless you’re in mining, or putting heaps into negative gearing,” she said.

“I think it’s a pretty average budget, it’s not very impressive at all.”

She said Mr Morrison’s plan to get young Australians into internships, via $1000 grants to employers, had sounded the death knell for “the fair day’s pay for a fair day’s work principle”.

Education cuts ‘not good enough’ says Renee Oldfield.

ASSAULT ON EDUCATION

Arts graduate and retail worker Renee Oldfield, 27, was initially relieved by a Budget that appeared to leave HECS untouched, but she soon discovered the fine print, which revealed that big cuts to education funding would be on their way.

“They have managed to slip in 20 per cent funding cuts to universities,” Ms Oldfield said. “This is simply not good enough.”

Hidden in a tiny table within the Budget Papers was the detail that the Government plans to save $2 billion through university deregulation by 2020 — money that will likely come from somewhere.

The document says the 2014-15 Budget’s controversial proposal to deregulate fees has been spiked, but that changes to how student loans are repaid and recovered remain on the table.

And 20 per cent cuts to university funding is marked pending “further consultation”, with the issue set to be a hot button election issue despite the fact the Budget has deferred any action until 2018.

Ms Oldfield said the Budget had focused spending in the wrong areas, such as $195 billion allocated to Defence.

“These funds could have been spent on health, education and people who are disadvantaged in our communities,” she said.

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