In a frank scrutiny of the Coalition’s proposed Super Home Buyer Scheme, largely a response to Labor’s proposed ‘Help to Buy’ scheme to own a 40 per cent stake in a mortgage, the Financial Planning Association of Australia (FPA) responded to the Liberal Party’s plan with reservations.
FPA chief executive officer Sarah Abood said the Coalition’s proposal is interesting, and in the short time since its release “we have had many conversations about it”.
“Under this proposal, a share of the member’s first principal place of residence could be considered to be an asset of their superannuation fund, like any other investment such as shares or bonds – although of course the personal usage rule would need to be waived for this kind of asset,” Ms Abood said.
She noted that from the super fund’s perspective, the asset would be illiquid and no income is generated while the fund holds a share of the home.
“On the other hand, the member might be saving some rent or mortgage interest, and we presume that any capital gain would be tax free to the fund, another potential positive,” she said.
She said the super fund would need to track the value of the home while it’s held, so it can report to members the real value of their super.
Regarding the potential sale of the home, Ms Abood said there would need to be a mechanism that calculates the share of capital gain due to the fund (including the impact of any improvements to the home along the way), and ensures this as well as the original principal is returned to the super fund.
She suggested this could be via a caveat on the home taken out by the super fund, or tracked by the Australian Taxation Office (ATO).
But she warned there would be reporting obligations and additional costs to consider in either case.
“The other concern we have is regulatory. Direct property is not a regulated financial product and anyone can advise on this type of asset. If someone is getting their advice from a property developer or credit provider, the person’s full financial situation might not be taken into account.”
Also warning of other potential unforeseen problems that could emerge from using the Coalition’s scheme, Ms Abood said it’s “vital” that people seek the advice of a professional financial planner before making any decisions that will affect their financial situation – and their superannuation, in this way.
“There is a risk that someone might end up ‘stranded’ in a property they can’t afford to sell, because after returning the original investment plus gain to the fund, they might not be able to afford to buy another home without that support,” she said.
Expressing openness to the Coalition’s plan from its virtue in addressing the critical issue of housing affordability, Ms Abood described the proposal as “interesting”.
“We are keen to understand more about how it might be implemented, because it’s important that this stacks up as a potentially good investment for someone’s super fund in its own right,” Ms Abood said.
“Otherwise, we might be just ‘robbing Peter to pay Paul’, by pulling out money now that is meant to be invested for peoples’ retirement incomes.”
I’m confused. At this stage it is nothing more than a thought bubble, and yet the FPA are critiquing the details of how it would work without knowing how it would work.
Surely the FPA aren’t doing the bidding of the Industry super funds…
Why would the super fund need to report to the member given the money would be in the persons house and they may change super funds before their house is sold…Seems you guys are confusing this way too much or is that because the union and retail funds are telling you to do so?
…” divided response from the industry peak bodies”…. let’s be really clear here…those peak bodies are completely conflicted…their divided responses to the Liberal Policy is all about the Policy not being in the peak bodies members (industry funds etc. etc .) best interest….
Amongst other things (theses industry funds etc…) are motivated to maintain as much money in superfunds as they can for their fees, their investment mandates and yes… their earnings/incomes…and of course we haven’t even mentioned the money that is donated by unions via union (industry funds) to the Labor party…. So don’t be surprised when Labor and their mates scream when you say give access to super… all they want is to put more into super…
How about we talk about why they want this…. and talk about (these funds ) trustee responsibilities / best interest duty to it’s members…if a member can put $50k from super into their home… with the average home ownership prior to trade up or down being 11years, then the chances of that investment increasing is very high (take for example the last 12 months average home price increase of 20% in most major capitals) … and it’s a tax free capital gain investment!!!
Then the member puts the money plus a pro rata amount based o the return (from the house sale / increase) on that $50k back into super after they sell the home…How is that not a great way to help first home buyers get a deposit and own a home…
Alternatively you can have the Labor Government own 40% of your home… and when you sell it in 10 years (cos your combined wages have gone above $120k) and it’s doubled in value you must pay back the government 40% of the capital improved / sale price value… Forget me starting about all the money you’ve put into the home improvements, like gardens, pools, painting… that the government does not contribute too…
I am so sick of the conflicts within our industry bodies, businesses and the lack of calling them out…
Well said….Those conflicts within Industry Associations should be called out otherwise Governments will forever intervene. You may be a professional but our industry bodies & advocates are unprofessional and deeply conflicted. I feel the same way the amount of conflicts in this industry, conflicted super funds, conflicted Governments makes me sick. We are the only people between consumers and these conflicts…. and yet Financial Planners have been made to blame for their mistakes and their conflicts and we’re the evil ones. It’s unprofessional to put up with that.
In fairness, most financial adviser work for companies that have them recommending products they own and make money from.
Separate advice from products and most of our problems go away.
A bit of a flaw with using the example of capital gains over the last 12 months, but I get the point.
Home prices are no going to go up for a very, very long time.
Love the fact that Labor say this will increase house prices, but they don’t think their proposal of the Government being a co-owner won’t.
Any financial incentive they provide to first home buyers will increase prices. Suggest they look at removing incentives for investors if they want a policy that won’t add further fuel to house prices.
The Labor policy is only for 10,000 homes where Liberal scheme is uncapped.
Practicing financial planners can do the job of scrutinising the policy implications for investors. The FPA should do their job (for once) and focus on lobbying and influencing outcomes for their members.
What happens if (like in the case of recent floods) the person loses their home and cannot afford to rebuild ie no insurance? In this case the borrowed super funds would never be returned to the fund and the retiree would not have an asset to support retirement needs.
Make it a condition that the home must be insured…
Lea, to your point… prey tell us what happens to the government 40% investment when the home is lost to flood and the land value is all that is left …. Remembering that that 40% investment is yours and my money cos we pay tax… it’s not the governments money…
‘robbing Peter to pay Paul’. Describes governments in a nutshell.