Unpacking proposed superannuation changes + Is your home earning more than you?

Hi everyone,

Hope you’ve had a good week. A bit of trivia first up.

I love a podcast called The Rest is History and this week I was at the gym on the bike for an hour listening to the first of their 4-part series on the life of the famous ancient general, Hannibal, the bloke who conquered Europe and famously rode elephants across the Alps into Italy. It’s a great story.

Anyway, I was halfway through the session, getting up a sweat, listening to a description of his first campaign in Spain and taking control of the Rio Tinto to fund his expedition. This was back in 219BC. 

“Rio Tinto”. My ears pricked up. Could it be Australia’s resource giant?

The name Rio Tinto comes from the Rio Tinto River in southwestern Spain, which is famous for its reddish (tinted) water caused by high iron and heavy metal content from natural mineral deposits of copper and silver.

The modern mining company Rio Tinto traces its origins to 1873, when a group of investors purchased a mining complex near the Rio Tinto River in Huelva, Spain, which had been mined since ancient times by civilisations like the Iberians, Romans, Moors ... and Hannibal.

The company's name was taken directly from the location of that original mine.

I love knowing stuff like that.

As a side note, I was hosting The Call (on the ausbiz streaming network) when Rio Tinto came up and both Andrew Wielandt from DP Wealth Advisory and Henry Jennings from Marcus Today judged it a “hold” for investors at these prices.

Both Henry and Andrew are also big The Rest Is History fans.

Okay, let’s get to business.

In this week’s newsletter: 

• Trump’s “big beautiful” Budget bill

• More signs inflation is under control

• The figures behind the proposed superannuation changes

• The impact of those super changes on the property market

• 6 ways first home buyers can get government assistance

• Is your home earning more per year than you are?

Trump’s “big beautiful” Budget bill

Before I get into the Australian economic and investment data this week, Donald Trump’s self-described “big beautiful” Budget bill passed the US lower house during the week, along party lines.

He sees this as a cornerstone of his economic changes but what it includes makes interesting reading:

• INCREASE taxes on people earning LESS than US$157,000 a year.

• Pay rises for immigration and border protection staff.

• US$1 billion tax break on gun silencers.

• Defund planned parenthood programs.

• Childless and able-bodied adults need to work 80 hours/month to get Medicaid (the US version of Medicare). Parents are exempt only until their youngest child turns 7 – this used to be 18.

• Must work until aged 64 to get food aid - up from 54.

• Harder to receive SNAP benefits which subsidise grocery bills for low-income families.

• Tax break on tanning beds.

• US$10 billion tax relief for gym memberships paid with health savings accounts.

• Lift debt ceiling by US$4 trillion.

I can’t really see a Budget Bill like this getting through the Australian parliament. I think I know where I’d rather live.

Inflation under control

The April Consumer Price Index came out during the week and the Reserve Bank would be pretty happy with it as it settles within their target range.

The all-important annual trimmed mean figure (which the RBA looks at closely when determining interest rates) rose a little from 2.7 per cent to 2.8 per cent and the headline CPI figure was steady at 2.4 per cent although most economists expected it to be a bit lower.

But the wash-up of expectations versus reality was pretty good.

It reinforced RBA Governor Michele Bullock’s comments a few days ago that she expects more rate cuts to come and isn’t concerned about what it could do in fuelling another property boom. She is only concerned with growing the economy and making sure people have a job.

So, another rate cut could be on the cards in July depending on upcoming economic growth figures and employment trends.

The surprises out of the April inflation figure were stronger than expected with clothing and footwear price increases (which should ease over the rest of the quarter) and an increase in building costs which have been steadily declining since August last year.

Home builders surveyed by the RBA’s liaison program noted there had been a ‘moderate increase in speculative building activity’, and most expected to see an increase in home sales after the Federal election and as the RBA interest rate-cutting cycle continues.

Elsewhere, health insurance rose by 4.4 per cent for the year because of the annual 3.73 per cent increase in health insurance premiums on 1 April ... the largest rise since 2018.

Food inflation was down because of falling meat, cereal and cheese prices, travel costs rose reflecting the Easter and school holidays, and furnishings and household goods prices were steady.

Electricity prices rose marginally but will rise a lot further next quarter. This week, the energy regulator determined that from July 1, the Default Market Offer will see household bills on standing offer plans rise by 0.5‑3.7 per cent in SE Qld, 2.3‑3.2 per cent in SA and a whopping 8.3‑9.7 per cent in NSW. The Essential Services Commission (ESC) increased the Victorian Default Offer by 1.2 per cent.

As I always say, it pays to shop around for the best energy plan because there are great deals on offer well below these regulated levels.

The figures behind the proposed tax changes to superannuation

Debate is certainly raging about the impact of Labor’s proposal to lift the earning tax on superannuation funds with balances over $3 million and also taxing unrealised gains.

As I said last week, a lot of very rich people have used the superannuation umbrella to legitimately hold millions of dollars of investments, which are taxed at the low rate of just 15 per cent compared with what they would pay if those investments were outside the super system.

All our superannuation fund accounts are taxed at this concessional rate to encourage us to fund a comfortable retirement. But I don’t think we, as taxpayers, should be funding luxury retirements of the rich. There has to be a limit - and the Federal Government is proposing that limit should be $3 million.

If you want a fancier retirement then fund it yourself, rather than other taxpayers subsidising it though superannuation tax concessions.

Anyway, the debate rages on with all sorts of hysterical claims being made. But one of the clearest explanations I’ve seen of the financial impact of these changes comes from Professor Miranda Stewart at Melbourne University Law School in the AFR during the week:

The excess super balance tax applies to fund members (in addition to the 15 per cent tax on earnings in the fund). You first work out your super earnings: the difference between the account closing balance at the end of the financial year and its opening balance for that year, adding back withdrawals, and deducting contributions. (If you have more than one fund, add them all together).

Assume an account closing balance of $4.5 million and an opening balance of $4.2 million, no withdrawals and employer contributions of, say, $25,000 (assume it’s net of the 15 per cent tax on contributions). Earnings would be $275,000 for the year.

But the tax applies only to earnings relating to the share of your balance that exceeds $3 million. In this example, that share is 33.33 per cent (4.5 million minus the $3 million threshold, divided by 4.5 million). So, the taxable super balance is 33.33 per cent of $275,000, or $91,657.50. The tax payable would be $13,748.

 The tiny cohort with balances in the tens of millions pay more tax because they have a greater excess over $3 million ... but they still only pay 15 per cent on annual earnings relating to that excess balance.

Everyone is used to taxing unrealised gains in the form of land tax and council rates. While it’s novel in the superannuation context, the principle is the same.

And all super funds – including SMSFs – are already required to value their fund balance each year – this includes valuing their assets.

What if fund earnings were negative because unrealised asset values went down? This is a genuine concern in this era of global uncertainty.

If you have zero or negative earnings during a year, the excess super balance tax does not apply even if your balance exceeds $3 million. Negative earnings carry forward to offset earnings and reduce the tax in future years.

What about cash to pay the tax? It is imposed on fund members but you can ask your fund to pay the tax from your account balance. Most funds will have no difficulty with this.

Funds that are cash-constrained – for example, some SMSFs that hold real property, risky assets such as art, or an interest in an active business – may face difficulties. The fund member will usually have access to other assets to pay the tax. If there are genuine difficulties, the Tax Office should respond appropriately with a payment plan.

The impact of superannuation tax changes on the property market

Any new tax changes naturally have a wider ripple effect on markets and Ray White group’s Head of Research, Vanessa Rader, can foresee significant consequences for the residential property market from the new superannuation regime.

Residential properties held within SMSFs already operate under strict regulatory constraints. These assets cannot be rented to, or occupied by, fund members or their relatives, cannot be improved using borrowed funds under limited recourse borrowing arrangements, and must satisfy the sole purpose test of providing retirement benefits to members. These restrictions, combined with the new tax implications, may significantly reduce the attractiveness of residential property as an SMSF investment vehicle.

This could lead to broader market implications such as potential listing supply increases and a shrinking pool of rental properties if SMSF trustees reconsider their investment strategies or restructure their portfolios before the implementation date. The tax change could drive structural shifts in residential property investment patterns, including a reduction in SMSF residential property holdings, particularly for those approaching the $3 million threshold.

There may also be increased preference for commercial properties that might deliver stronger income yields relative to capital growth, movement of assets into alternative tax-efficient structures outside superannuation, and potential migration of property investment capital into primary residences, which remain tax-exempt.

In the long term, this policy could impact residential property valuations in specific market segments. Properties typically favoured by SMSF investors are often in the middle to upper price brackets in metropolitan areas and might experience pricing adjustments as demand from this investor class diminishes.

The proposed changes form part of a broader re-evaluation of Australia's retirement savings framework. While presented as affecting only a small percentage of superannuation accounts currently, the absence of indexation for the $3 million threshold means an expanding portion of retirement savers will likely be impacted over time as asset values grow.

For residential property investors using SMSFs, these changes represent a significant shift in the investment landscape, potentially altering the risk-return calculations that have traditionally made residential real estate an attractive component of retirement portfolios.

6 ways the government can help first home buyers

There’s no denying it - buying your first home in a market of rising prices and housing shortages is tough. So tough that many first home buyers may wonder if it’s better to give up the home ownership dream altogether … and accept a life of renting.

But here’s the thing: when you buy property, you start building equity - the portion of the home you truly own as you pay off your mortgage. Over time, you own more of your asset outright, rather than helping someone else pay theirs off with your rental contribution.

Owning a home can set you up in so many ways - it could even be the difference between retiring comfortably or needing to keep working.

While some buyers get help from the Bank of Mum and Dad, many don’t have that option. But there are other ways that help you step onto the home ownership ladder.

First home buyer help

There are government incentives designed to give first-home buyers a much-needed boost to break into the property market.

While some argue these schemes drive up property prices and make homeownership more costly long-term, these incentives are very popular, so let’s take a look at what's available.

1. First Home Guarantee (FHG)

The FHG allows eligible buyers to purchase with as little as a 5 per cent deposit and no lenders mortgage insurance (LMI), which usually applies if your deposit is under 20 per cent. The government guarantees the remaining 15 per cent, helping you buy sooner.

Income caps apply: singles must earn under $125,000 and joint applicants under $200,000. Price caps also vary - $900,000 in Sydney, $700,000 in Brisbane, for example. There are 35,000 places available for FY2024-25.

Please remember that a smaller deposit means a bigger loan. It’s still a good move to save as much of the deposit as you can, but also don’t wait for prices to jump before you move.

Learn more.

2.Regional First Home Buyer Guarantee (RFHBG)

Looking at a sea or tree change? The RFHBG offers similar support for regional areas, with 10,000 spots available this financial year.

Buyers need a 5 per cent deposit and must live in the home. Use Housing Australia’s eligibility tool to see if your location qualifies.

Learn more.

3. Family Home Guarantee

Designed specifically for single parents earning under $125,000, this scheme lets you buy with just a 2 per cent deposit and no LMI. Applicants must have at least one child under 18 and not currently own property.

Learn more.

4. First Home Super Saver Scheme (SSS)

Run by the ATO, this lets you withdraw up to $50,000 of voluntary super contributions for your deposit.

While I always say super is best left untouched - accessing it early is a bit like taking cookies out of the oven before they’re baked - this scheme could help some buyers get their foot in the property market door.

But do give your super strategy some thought first. For example, use the superannuation calculator on your fund’s website and work out the impact on your retirement payout of taking that $50,000 out early. Then work out the extra monthly or annual contributions you’d need to make to get back to that original pre-withdrawal level. Then automatically make those extra contributions so you end up having the best of both worlds ... getting into the property market and retiring with a healthy balance.

You don’t want to miss out on the magic of compounding in your superannuation.

5. Help To Buy Scheme

This much-talked about scheme hasn’t rolled out yet, but applications are expected later this year. Similar programs (like Victoria’s Homebuyer Fund) will transition to the federal version and it will help out 40,000 households.

Help to Buy is a shared equity initiative - eligible buyers need just a 2 per cent deposit, and the government contributes up to 40 per cent of the property’s value.

Ahead of the federal election, Labor promised to raise property caps to reflect values. In Sydney, the cap is now $1.3 million and in Melbourne it’s $950,000.

Learn more.

6. State-based support for first home buyers

Alongside all of the above, each state provides its own support for first home buyers through stamp duty concessions.

Many also offer incentives for purchasing newly-built homes or buying vacant land to build on, as well as purchasing in regional areas. All are aimed at easing housing shortages and increasing supply.

Here’s an overview:

• NSW - Full stamp duty exemption when the property is under $800,000. Discounts up to $1 million valuation. $10,000 grant if purchasing or building a new home valued up to $750,000,

• Victoria - Duty exemptions under $600,000, concessions up to $750,000. $10,000 grant for new builds.

• Queensland - Stamp duty concessions under $700,000 (up to $24,525 saved). $15,000 - $30,000 grant for new builds.

• South Australia – Stamp duty relief, plus $15,000 grant for new builds, off-the-plan purchases, or vacant land.

• WA – Full duty exemptions under $500,000 (up to $18,000 saved), discounted to $700,000 ($750,000 in a regional area). Plus $10,000 grant for buying or building.

Seek advice

With the range of government assistance available, it’s worth exploring what first home buyer support you may qualify for, before deciding if home ownership really is out of reach.

Is your home earning more per year than you are?

According to real estate giant, Ray White, Aussie house prices jumped from $871,671 to $918,296, in the year to April 2025. Meanwhile, our median annual income sat at $72,592; that's 1.5 times more than the $46,625 our houses quietly made for us over the year. 

Perth is the only place where houses earned more than people. In fact, Perth residents seem to have it best. Not only do they earn the second highest annual income across the country, but their houses made the biggest gains in the last 12 months. Perth house prices surged by $95,022, climbing from $812,482 to $907,504. Even Canberra with annual incomes of $93,351 couldn’t match what Perth houses made.

In Adelaide, it’s neck and neck with both annual personal income and house price growth sitting at just over $63,000. Brisbane home owners are just keeping their noses in front, earning roughly $2,000 more than their houses appreciated. 

However, the gap widens from here. Melbourne and Canberra have the greatest disparity between personal income and house price growth ... Melbournians made 5.5 times more than their properties, while Canberrans pulled in five times what their houses did.

It’s no surprise then that Melbourne dominates the list of suburbs where people earn more than their houses. The only non-Melbourne suburbs on this list are Balmain (Sydney), Yarralumla and Deakin (both in Canberra). What's striking is these are all wealthy suburbs with annual incomes between $130,000-$156,000 - double Australia's median.

This is the opposite of what we would expect. Typically, house values grow faster than incomes in expensive areas, and incomes outpace house growth in more affordable areas. Four years ago, during the last census, 78 per cent of suburbs where people out-earned their homes were in regional areas with average house prices of $360,000. Today, the suburbs where you earn more than your house have prices between $1.9-3.9 million.