Proposed change to reporting rules may boost superannuation investment in housing
A review by the Australian Securities and Investments Commission (ASIC) into how stamp duty is reported by superannuation funds could result in the construction of up to 35,000 additional homes over five years, according to industry estimates.
The potential change would alter the way stamp duty is disclosed under Regulatory Guide 97. The Property Council of Australia has maintained that the existing requirement to include stamp duty as a fee under RG 97 has discouraged investment in new urban assets, as it inflates reported costs for funds.
According to a previous report by the Housing Industry Association, stamp duty charges are also placing a substantial financial burden on homebuyers, with borrowers in New South Wales, Victoria and South Australia who finance their stamp duty through a mortgage incurring more than $40,000 in additional repayments over the life of their loan.
A change to the reporting method, which would not require government expenditure, could potentially result in nearly $10 billion being directed towards new housing supply over several years. This could translate to tens of thousands of additional homes for Australians to buy or rent within five years.
“This is exactly the sort of actionable idea to address regulatory issues ASIC is open to testing,” said Joe Longo (pictured left), chair of ASIC. “If the review finds appropriate changes will deliver benefits without undermining disclosures, then ASIC will act. We want to ensure red tape isn’t unnecessarily holding back investments.
“A significant portion of Australia’s $4 trillion superannuation system already invests in property assets, but we have heard there is appetite for more. This review will allow us to look at the way our regulations govern the calculation of fee-adjusted returns and encourage transparency and investment in our economy.”
Federal treasurer Jim Chalmers (pictured centre) described the ASIC review as a potentially significant development. “The reason this matters, is because the Property Council has said, that if this requirement was eased it could mean an extra 35,000 homes built by institutional investors over the course of the next five years,” he said.
Mike Zorbas (pictured right), chief executive of the Property Council, welcomed the review and highlighted the government’s efforts to improve productivity through regulatory reform.
“Currently, superannuation funds are being penalised for investing our money in Australian housing, offices, industrial parks and shopping malls – all vital to world-class, productive cities,” Zorbas said. “ASIC is to be commended for reviewing the current rules, which make super funds’ housing investments look more expensive than they are. It creates an uneven playing field.
“Changing RG 97 won’t cost the Budget a cent, but it can help deliver 35,000 additional new homes for Australians over five years. We can hope too, that the government takes this mindset into improving the investment pathways for institutions wanting to co-invest with Australian companies through the FIRB process, which has slowed down in recent years.”
The Property Council has clarified that stamp duty should continue to be reported, but recommended it be listed separately as an unavoidable tax rather than as a fee, to improve comparability across asset classes.
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