Housing and big banks in Budget spotlight

The Federal Budget has been delivered, complete with first home buyer savings schemes, taxes for the big banks and more

Housing and big banks in Budget spotlight



The long awaited Federal Budget has finally been released with a variety of measures aimed at cooling down the heated housing market and helping consumers get a fairer deal from the banks.

In parliament yesterday (9 May), Scott Morrison touted the budget as credible, affordable and honest – one which would tackle rising cost of living pressures for all Australians.

Expanded regulator powers

Morrison promised to assist regulatory agencies in using any “flexible and calibrated” controls at their disposal.

“We will legislate to extend APRA’s ability to apply controls to the non-ADI sector and explicitly allow them to differentiate the application of loan controls by location,” he said.

Taxing the banks

A six-basis point levy on bank liabilities will be introduced, effective from 1 July, Morrison said.

“This represents an additional and fair contribution from our major banks, is similar to measures imposed in other advanced countries, and will even up the playing field for smaller banks.”

The levy will only be paid by Australia’s five largest banks with assessed liabilities of $100bn or more and excludes superannuation funds and insurers. Customer deposits of less than $250,000 as well as additional capital requirements imposed by the regulators will also be excluded.

“Unlike the previous bank deposit tax, this is specifically not a levy on pensioners’ and others’ ordinary deposit accounts, nor is it on home loans,” Morrison said.

He promised the measure would deliver $6.2bn to support budget repair.

Holding banks accountable

Morrison announced the Australian Financial Complaints Authority, a one-stop shop for consumers to resolve their disputes with the banks and obtain more binding outcomes.

A new Banking Executive Accountability regime will also be established, which requires all senior banking executives to register with APRA.

“If in breach, they can be deregistered and disqualified from holding executive positions, and be stripped of their significant bonuses,” Morrison said.

“Banks will also be held to account if they try and hide misconduct by executives with new mandatory reporting requirements.”

For breaching any misconduct rules, small banks will face fines starting at $50m while large banks will face fines of $200m or more.

A permanent team will be established within the ACCC to investigate competition within the banking and financial system while the government will introduce an open banking regime in 2018 to allow consumers better access to their own data. 

Helping first home buyers

Morrison announced a number of demand-side measures designed to improve housing affordability. He introduced a First Home Super Savers Scheme – a salary sacrificing model allowing FHBs to deposit a portion of their income into their superannuation for the explicit purpose of buying a home.

From 1 July, this will attract the tax advantages of super with contributions being taxed at 15% instead of marginal rates. Withdrawals will be taxed at their marginal rate, less 30 percentage points.

“Savers will not have to set up another account, they can just use their existing super account and decide how much of their income they want to put aside to save for their first home deposit,” Morrison said.

“Contributions will be limited to $30,000 per person in total and $15,000 per year. Under this plan, most first home savers will be able accelerate their savings by at least 30%.”

Additional downsizing concessions

The government will also encourage older Australians to free up housing stock by offering a non-concessional contribution of up to $300,000 to downsizers over the age of 65. This will be placed into their superannuation funds from the proceeds of the sale of their principal home.

Negative gearing

“On demand management, we will continue to prefer the scalpel to the chainsaw, to avoid a housing shock,” Morrison said. “Mum and dad investors will continue to be able to use negative gearing, supporting the supply of rental housing and placing downward pressure on rents.”

However, the government has slightly tweaked negative gearing for investors by disallowing deductions for travel expenses from 1 July this year. Additionally, plant and equipment depreciation deductions will be limited to expenses incurred directly by investors, effective from today (10 May).

Improving supply

Morrison once more pushed supply as a key solution for rising house prices, saying the government would work with state, territory and local governments to build additional dwellings.

“The Commonwealth will replace the National Affordable Housing Agreement that provides $1.3bn every year to the states and territories, with a new set of agreements, with the same funding, requiring the states to deliver on housing supply targets and reform their planning systems.”

A further $1bn would be used to establish a National Housing Infrastructure Facility which would fund ‘micro’ city deals that remove infrastructure impediments when developing new homes.

Unlocking government land

An online Commonwealth land registry will be created to identify sites which can be freed up and made available for residential development.

“In Melbourne, land for a new suburb that could cater for 6,000 new homes will be unlocked just 10km from the CBD, by releasing surplus Defence land at Maribyrnong.

The Turnbull Government will also help deliver tens of thousands of new homes needed in Western Sydney as part of our Western Sydney city deal,” Morrison said.

Getting tough on foreign buyers

Finally, the government will introduce tougher rules for foreign investment in residential dwellings by removing the main residence capital gains tax exemption and tightening compliance.

“We will also apply an annual foreign investment levy of at least $5,000 on all future foreign investors who fail to either occupy or lease their property for at least six months each year.”

Requirements preventing developers from selling over 50% of new developments to foreign investors will also be re-introduced.

Related stories:

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New blueprint laid out for housing affordability

RBA flags continuing risks in housing market

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