The tax advantages under the Government's new superannuation laws are encouraging some property investors to sell-up and boost their super.
But this strategy is only likely to benefit a small section of the market.
Housing Industry Association (HIA) chief economist Simon Tennent said he believes the super changes, which come into effect on July 1, have triggered an exit from the property market, particularly for disappointed investors or those nearing retirement.
Under the Federal Government's new super regulations, money received from a taxed super fund will be tax-free for people over the age of 60, making it the most tax-effective investment for retirement.
At present, money is taxed when put into the fund, while within the fund, and generally when withdrawn.
Once the new laws are in place, an individual will be limited to investments totalling $150,000 a year or a maximum $450,000 within a three-year period.
However, at present the Government is allowing deposits of up to $1 million to be put into super before the June 30, 2007, cut-off date.
This transitional phase has opened a window of opportunity for some investors to boost their retirement savings by selling other investments, such as property.
Mr Tennent said some investors had become disheartened with the property market due to recent low house price growth, which he did not see picking up for at least 12 to 18 months.
"I don't think prices will keep accelerating because we've hit an affordability threshold,'' he said.
"And as this coincides with changes to superannuation, our view is that there will be a flow of funds out of property.''
However, ANZ financial planner Ron Holmes said there were a lot of issues to consider before deciding to move property investments into super.
"It is a complex area; There's so many possible 'maybes' and 'what-ifs', and everybody's circumstances are so different,'' he said.
Mr Holmes said the investor's age, if they were retired or when they were planning to retire, and whether they were married, all played a role in determining if this strategy would be beneficial.
Other important considerations were house price appreciation, how much capital gains tax investors would pay when selling their property, and how much they were saving in investment property tax deductions, he said.
Mr Holmes said this strategy would probably only benefit a very narrow part of the market, including those who were nearing retirement and were planning to sell properties valued at about $1 million if they were single or $2 million if they were married.
He said many of those approaching retirement, but with a lower value investment property, could sell their property at anytime after the June 30 cut-off date and still invest the money in super.
"If they're a married couple, and they've got a $900,000 property and they sell it, they can still put $450,000 each into their super after June 30,'' he said.
Mr Holmes said waiting until retirement to sell investment property could also have benefits, with retirees paying less capital gains tax on their properties due to their lower income, Mr Holmes said.
He said younger investors needed to be wary that moving property investments into super would restrict their access to that money, while they would also lose their tax offsets.
"I can't see it as being a very attractive strategy if currently it's providing you with tax offsets and the property is growing,'' he said.
However, he said that before making any decisions, investors should closely examine their individual situation.
"Go along and talk to your licensed tax adviser and your licensed financial planner before you do a thing,'' he said.
source: AAP
