In an exclusive interview with ifa, Mr Frydenberg said he is concerned about the effects of leveraging in superannuation in the event of an “external economic shock”.
“This is one of the recommendations out of FSI that I am interested in looking at because superannuation is principally a retirement income stream and if people can leverage up, they run the risk that if there is a major external economic shock, they could be left high and dry,” he said.
“That’s neither in the interests of the superannuant or the government,” he added.
Mr Frydenberg announced late last month that the government intends to openly consult on this recommendation, and will explore options such as banning personal guarantees by SMSFs and improving the standard of advice given to trustees on leveraged investments.
The comments also follow the recent proposal by Treasurer Joe Hockey to open superannuation up to first home buyers in light of housing affordability concerns for young investors.
“I get a lot of people approaching me saying that young people should be able to use their superannuation to fund a deposit on a home – on their first home,” Mr Hockey said.
“I am concerned about rising house prices and the accessibility to homes and homeownership for younger Australians. But we’ve got a limited pool of savings – we need to have these conversations.”
The discussion about housing affordability needs to go down the path of “Age of entitlement”. The problem is NOT affordability but rather EXPECTATIONS.
In our big (Victorian) regional cities like Albury/Wodonga, Bendigo, Shepparton, etc, a brand new 4 bed, 2 bath house in a good location, within 10 minutes from work, etc can be bought for mid $300,000’s. A house that would cost $1.8m in Fairfield area (Vic)would cost $600k where I live!
Affordable housing exists, so do quality, well paying country jobs, it’s just that people WANT to live in their dream house in their dream area too soon, or are not willing to compromise.
Government should be encouraging them to downgrade expectations or compromise and move regionally instead of raiding super…
It’s not the legislation or strategy thats the problem, its the property spruikers! Used appropriately, this ability to leverage can be a great way to create wealth and is certainly NOT the cause of higher property prices. Regulate real estate agents and property sellers (AND ACCOUNTANTS GIVING THIS ADVICE), not the poor people trying to avoid age pension by building sufficient super savings.
Just as property needs to be in the discussion around retirement because it is the most valuable asset most people have, so the acquisition of a first home using superannuation needs to be seriously considered. Property is an asset class and provided a suitable structure (eg the DomaCom Fund fractional model)can be interposed and there are rules to protect the super fund’s investment in the property what is the problem? If a persons super fund is used to for a deposit then the fund owns a percentage and is therefore entitled to receive rent just as it would if a stranger rented a property owned by a super fund. Whenever the property is sold that percentage is returned to the fund.