Self-managed superannuation funds would be banned from borrowing money under an expanded housing affordability policy being unveiled by federal Labor today as unchecked growth could pose a threat to the nation's financial system stability over the long term due to growing exposure to bad investments.
The new measures will include adopting a nationally consistent vacant residential property tax, as recently imposed by the Victorian government, to curb investors buying properties and leaving them vacant.
Labor will also double the fines imposed on foreign investors who illegally purchase residential real estate.
Victoria to tax owners for leaving homes vacant as it tackles housing crisis
Labor leader Bill Shorten and Shadow Treasurer Chris Bowen have a new suite of seven measures that will add to Labor's existing policy to curb capital gains tax concessions and negative gearing.
A Labor government would adopt a Coalition proposal to establish a bond aggregator, which provides a larger and cheaper pool of funds for the private sector to build community housing.
It will reappoint a housing minister.
Since September 2013, when the Coalition came to power, prices in Sydney have increased by nearly 50 per cent and by more than 30 per cent in Melbourne.
Residential vacancy rates in the Sydney metropolitan market have sunk to 1.9 percent, while Melbourne's vacancy rate fell to a 10 year low in February to 1.7 percent.
Former banker David Murray recommended in his 2014 Financial System Inquiry that a general ban on borrowing by SMSFs, which was lifted in 2007, be restored. Since 2012, borrowings by self-managed funds has grown from $2.5 billion to $24 billion, of which 91 per cent, or almost $22 billion has been for residential and commercial property.
"In addition, borrowing by superannuation funds implicitly transfers some of the downside risks to taxpayers, who underwrite adverse outcomes in the superannuation system through the provision of the age pension," his inquiry said.
Mr Shorten said restoring the general ban on borrowing would "help cool an overheated housing market partly driven by wealthy Self-Managed Super Funds".
"Ignoring this recommendation would also leave the budget more exposed over time.
"This measure will prevent the unnecessary build-up of risk in Australia's superannuation system, reduce future calls on the aged pension as a result of a less diversified superannuation system, and make the financial system more resilient on the face of potential economic shocks."
What Victoria’s new vacant property tax means to you: Juwai's Gavin Norris
Labor will stick with its existing policy of halving the 50 per cent capital gains tax exemption for property investors to 25 per cent and restricting future negative gearing to new homes only.
Labor's plan to double foreign investor fees will result in new charges of between $10,000 and $40,600, depending on the value of the property.