Latest NewsSuper Changes 'pushed People into Property'Tuesday, 27 December 2016

Investment and Financial Services Association chief executive John Brogden yesterday blamed the federal government's changes to superannuation last year for prompting people to turn to investment properties for their retirement savings.

In an interview with The Australian, Mr Brogden said there was also a concern that there would be further cuts in the May budget to the caps on allowable contributions to superannuation beyond the compulsory 9 per cent superannuation guarantee levels.

He said concern about the Rudd government's superannuation changes, following the surprise measures in last year's budget and uncertainty about the federal government's plans for superannuation, had encouraged people who had some extra savings to look for other means of investment, including investment properties.

"Cutting the cap on superannuation contributions and the prospect of it being further cut back in the budget means that people who want to top up their super before retirement will go off and find another form of tax-effective investment -- including negative gearing on property investments," he said.

Mr Brogden said it was the tax concessions that encouraged those people who did have some extra money to put away for their retirement to put in into superannuation in the hope of becoming self-funded retirees.

"We created a compulsory retirement savings system based on tax incentives," he said.

"The more you tax those concessions away, the more you undermine the retirement outcome. It will be a very clear incentive for people to buy investment properties and negatively gear them."

In last year's budget, the government halved the voluntary amounts that could be contributed to superannuation in addition to the nine per cent superannuation guarantee levy from $100,000 to $50,000 for those over 50 and from $50,000 to $25,000 for those under 50.

This takes effect for the tax year ending June 30 this year.

The limit will be further reduced to $25,000 for those over 50 from July 1, 2012.

Mr Brogden's comments come as Reserve Bank governor Glenn Stevens this week took the unusual step of going on national morning television to express his concern about rising housing prices.

While last year saw the advent of many first-home buyers taking advantage of the federal government's first-home owner grants, real estate agents report a more recent return of investors into the market, adding to the pressure on prices.

Mr Brogden said people on low incomes would most likely depend largely on the pension to fund their retirement and the savings from the 9 per cent compulsory level, while those on higher incomes should be expected to provide for their own retirement.

He said it was important for those on incomes from $40,000 to about $120,000 to be encouraged to put in extra money into their superannuation savings so they would be less dependent on the pension in their retirement.

"You want to give them the signals and the tax incentives to want to top up their super and not to leave their super as it is and invest in others areas such as investment properties and force up property prices," he said.

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