Labor closes loophole on self-managed super funds in deal with the Greens

Labor will close a loophole that allowed property investors to use self-managed super funds to buy homes in a deal it has struck with the Greens to have its tax reform pass in parliament.

Today, the Greens confirmed they will vote in favour of the bill in the Senate this fortnight, allowing the first tranche of legislation to pass the parliament.

The bill, which has tied the changes to a $250 tax offset and a rolling tax cut, is expected to pass on Thursday before parliament goes on break for the winter.

In exchange, Labor has included an additional amendment to prevent people with self-managed superannuation funds (SMSFs) from using them to secure loans to buy residential properties.

The so-called loophole is generally not allowed but can occur under limited recourse borrowing arrangements.

According to the government, those arrangements make up less than 1 per cent of all residential borrowing and less than 0.5 per cent of borrowing for new homes.

Read more

House values facing $100,000 drop, bank predicts

The Australian Tax Office estimates there are 663,867 SMSFs worth a combined $1.06 trillion.

The changes do not affect tax arrangements for superannuation or impact existing SMSF property arrangements.

There will also be a 45-day transition period for arrangements currently midstream.

This amendment will add an estimated $50 million over forward estimates to the budget.

Greens treasury spokesman Nick McKim said closing the loophole will cut down on the amount of investors outbidding genuine first homebuyers.

“The changes we have secured means that there will be fewer wealthy property investors turning up to auctions and outbidding renters who want to buy their first home,” he said.

Tuesday’s development comes after Labor’s ongoing negotiations with the Greens to back them in the Senate.

The government announced changes to its tax bill last week, while it was before the Senate, to create carve-outs for small businesses, start-ups and testamentary trusts and remove ministerial powers that would have allowed the treasurer of the day to make broad changes after the bill is made law.

This will leave the government $475 million worse off over the forward estimates.

At the time, Albanese brushed off the figure and said they would still raise $8.1 billion from the changes to the capital gains, negative gearing and trusts.

Read more

Hanson calls for Albanese to follow UK PM and resign amid bolstering new poll

Labor wins tax support in exchange for NDIS delay

Labor has also agreed to grant an eight-week extension to the inquiry into the National Disability Insurance Scheme cuts until August 14 in exchange for the Greens’ support.

NDIS Minister Mark Butler estimated the delay to the bill will cost the budget a “few hundred million dollars”.

The government has notably failed to agree on a key Greens demand to soften the grandfathering on properties that are negatively geared.

Greens Leader Larissa Waters said she was disappointed Labor has not gone far enough with their tax reform, but said the changes were a small step in the right direction.

“Greens will vote to see it pass the parliament this fortnight, but we will not stop fighting for renters, we will not stop fighting for young people, and for all Australians to be able to afford a roof over their heads,” she told reporters late this morning.

Waters said the Greens would continue to oppose the NDIS bill in parliament and extend the inquiry even further but could not answer whether the party has received any assurances from Labor that it would not bypass them to work with the Coalition to pass the cuts.

Politicians decry ‘dodgy’ deal

Opposition Leader Angus Taylor said the Labor-Greens deal is dangerous, and once again vowed to repeal the bill if he is elected at the next federal election.

“We will go to the next election campaigning every day between now and then to axe these toxic taxes. They must go,” he said.

“It’s a dangerous deal for some of the hardest working Australians but it’s a dangerous deal for all Australians trying to get ahead, and Labor is pulling up the ladder of opportunity in this country.”

Read more

Millions of Aussies to get $500 back as tax benefits kick in within days

His shadow treasurer, Tim Wilson, said it was dodgy and dishonest.

In the Senate, One Nation Leader Pauline labelled the bill a “blatant tax grab” and said she would keep the capital gains discount at its current 50 per cent discount and limit negative gearing to two investment properties.

“One Nation will never support the changes to capital gains and negative gearing in this bill,” she said.