On Sunday, Prime Minister Scott Morrison announced the Coalition’s Super Home Buyer Scheme which would enable first home buyers to use up to 40 per cent of their superannuation (maximum $50,000) towards buying a house.
“This would apply to both new and existing homes and whatever amount is invested will be returned to your super when you sell the home, including the share of the capital gain from the sale of that home,” Mr Morrison said at the Liberal party’s federal election campaign launch in Brisbane.
“Superannuation is there to help Australians in their retirement — the evidence shows that.
“The best thing we can do to help Australians achieve financial security in their retirement is to help them own their own home.”
First home buyers who have separately saved 5 per cent of the required deposit would be eligible for the scheme to start on 1 July 2023. Buyers must also only buy the property for owner-occupier purposes and must live in the home for at least 12 months.
Shortly after the announcement, the Financial Services Council (FSC) rejected the scheme, with CEO Blake Briggs explaining it would undermine the purpose of the superannuation system and “weaken” its ability to provide higher standards of living in retirement.
“The FSC recognises there is a correlation between renting in retirement and poverty amongst older Australians, but Australians should not have to choose between a home and their retirement savings,” Mr Briggs said.
“The government’s own majority report into ‘Housing Affordability and Supply in Australia’ concluded that superannuation should only ever be used for housing if there were commensurate measures to increase supply.
“The government’s supply measure only extends downsizing to 1.3 million households, whilst potentially allowing approximately 5.3 million under 35-year-old Australians that do not yet own a home access their superannuation to buy a first home.
“The government has an obligation to do more to boost supply, otherwise unleashing superannuation savings on the housing market risks driving prices higher still.”
Similarly, Insurance Super Australia (ISA) said not only does the scheme undermine retirement savings, but that it would add tens of thousands of dollars to housing prices.
Analysis conducted by ISA suggested that a surge in housing prices could hike Australia’s five major capital city median property prices by 8 to 16 per cent.
“Throwing super into the housing market would be like throwing petrol on a bonfire – it will jack up prices, inflate young people’s mortgages and add to the aged pension, which taxpayers will have to pay for,” ISA chief executive Bernie Dean said.
“Super is meant to be for people’s retirement, not supercharging house prices and pushing the home ownership dream further away.
“Not only will it lock young people into hugely inflated mortgages without any requirement for their own deposit, it will torpedo investment returns for everyone leading to everyone having far less at retirement.”
Property economists McKell Institute has also announced their stance against the Coalition’s plan, referencing a report it released just five months ago which looked at the effects on the housing market should Australians be allowed to use their super on a home deposit.
The modelling found that giving prospective buyers access to $40,000 of superannuation would increase the median house prices across the country – almost $100,000 in Brisbane, over $90,000 in Hobart, over $84,000 in Adelaide, over $57,000 in Perth, over $40,000 in Sydney, over $30,000 in Melbourne.
The McKell Institute report’s suggested an additional $25 billion of debt would be incurred by Melbourne homes and $23 billion in Sydney.
“Homes are already unaffordable for millions of Australians and Scott Morrison’s proposal would pour fuel on the fire,” McKell Institute executive director Michael Buckland said.
“What first home buyers desperately need is a little calm in the overheated housing market. This proposal would kick start yet another house price spiral, stripping young people of their super savings and doing virtually nothing to improve real affordability.
“Super-for-housing would basically mean first home buyers handing their hard-earned retirement savings to existing property owners, when they would be much better off investing that money in super.
“Young Australians need their retirement savings quarantined and compounding. Using these savings to fuel yet another house price frenzy would be policy madness.”
Super boost for retirees
Meanwhile, the Retirement Living Council of the Property Council of Australia has applauded a separate plan announced by the government on Sunday to “incentivise” older Australians by encouraging them to downsize their homes and put up to $300,000 from the sale into their superannuation fund.
Executive director Ben Myers called the move an important step for both older Australians looking for a home that suits them, and younger families who will see more stock on market.
Mr Myers said the Coalition’s scheme would get Australia on a path to “right-sizing”.
“We know many older Australians face barriers to right-sizing their housing and today’s announcement will provide real incentives to encourage people to unlock their home equity and move into a home that supports them to live independently for longer,” he said.
“Encouraging older Australians to right-size, not only contributes to healthier ageing, it’s also one of the smartest and fastest ways a government can boost much needed housing supply for families.”
AS usual the vested interests are at play here.
For all the publicity about this, can anyone tell me what share of capital gain has to be returned to super or is this just one of things that Morrison throws out there without question just to get a vote
It’s a good idea if your only goal in life is to be elected, to be in power.
Like or dislike this policy, it smacks of a last minute idea to try and grab some votes in a demographic that they’re not winning with, in political seats they’re behind in too (i.e. inner city seats likely to go greens or independent are generally the most expensive suburbs and thus hardest for the younger generations to buy in), etc.
There have been numerous FAILED policies that provided funds to buyers, and they have really only lead to higher demand or higher budgets from stagnant demand. Until the supply side of property is addressed, the issue will not be meaningful addressed.
I’ve only ever voted liberal, but this time around I’ll be voting for an independent, in a ‘too close to call’ seat currently held by Liberal/Nats.
Our education system is broken, our health system is broken too. Both have ample funding, just obscene levels of waste and poor management.
I think I’m growing up and am now more worried about the future of this country and all of our people moreso than just what’s in it for me.
This policy to me is something I once would have applauded, but that was my unconscious bias. Nowadays, I see this for what it is, and its more about votes than helping first home buyers.
That’s to suggest it’s a terrible policy, but it’s policy on the fly to win votes, not well considered policy that will help my children or this country over the next 100 years.
Morrison has no idea what he is doing…it is as simple as that.
Snout in trough FSC & ISA typical vested interests. Under 30’s don’t need super have 30+ years to save. Taking $20K out of super as interest free deferred equity loan with $ + growth to go back into super on sale TAX FREE. They are happy though to see taxpayers fund Labor shared equity scheme
Interesting this. Has the sole purpose test gone?
Only for politicians desperate for votes. If you’re a financial planner or trustee of an SMSF, heaven help you if you breach the sole purpose test…
Of course, throwing billions in new super contributions at the domestic stock market isn’t like throwing petrol on a bonfire either? LOL. This is simply whinging from fee hungry super funds, who will find the electorate will accept the Liberals fairly modest proposal very easily. The super funds didn’t collapse when $30 Bn was taken out temporarily during the 2020 Covid period, and they certainly won’t collapse with this proposal either. However it will actually greatly increase engagement between members & their own money, which is a good thing. Unless the super funds don’t want increased engagement?
Apart from the fact that those most in need of a deposit have probably already taken out $20,000 from their super when the government played winners & losers with who got #JobRorter payments…
What’s $50k as a deposit gonna buy you?
Interesting to see all the superannuation vested interest groups taking a negative stance on this policy, mainly I suspect because they might lose some funds under management.
The union super funds are of course screaming out the loudest.
It’s not a bad idea in theory but there would be some longer term practical implications if that super wasn’t topped up again. But that super money is still going into an asset that is needed at retirement, i.e. a home without a mortgage.
There is no gaurantee that it will cause house prices to go up, depends on a number of factors not the least being the rise in interest rates which will cause prices to cool over the next few years.
So it may be best to wait awhile before taking advantage of this scheme, assuming the coalition government is returned.
If this election was a baseball match there would be calls for the Mercy Rule. The air is almost out of Mr Morrison’s little life raft but he still goes on, desperately grabbing anything that flows past. The downsizing proposal could leave 55 – 60s in a housing market, where because of over supply of those suddenly wishing to downsize, the value of their homes is on a downslide. Sort of like everybody selling bitcoin shares at the one time.
There is also a warning in the announcement for advisers who recommend rollovers to fund risk life premiums. Many of those funds are now down $20,000, because they extracted that money during the pandemic. Now if anyone has $50,000 in a super fund, it could disappear to pay a house deposit. Ongoing rollovers from super funds to pay ongoing life risk premiums might just be a problem! And a new formula from ASIC. Hello lapse city!
Absolutely ridiculous overblown hysterical commentary. 1. its for new homebuyers so its not going to lead to a massive rush and hence will not cause prices to hyperinflate (note the market is rapidly softening now) 2. The amounts involved will not irrevocably damage super savings nor cause a massive exodus from Super. 3 those on the left of the political divide (ie labour and greens) should stop being hypocritical and have the temerity to come out and support ending negative gearing to end the housing crisis.
The Super Home Buyer Scheme and the Downsizer Legislation should not be viewed in isolation, nor any potential impact on housing prices and retirement funding benefits. Like negative gearing and home equity release they are part of a picture, not all of which is relevant to all people.
Foregoing some super to get a home for 30-40 years which can be used for equity release on retirement if needed may be more important to many people than just accumulating their super. Property is always rising, correcting, plateauing but so is the share market rising and falling over the same time frame. I don’t think it fair or reasonable that people cannot have the option that suits them. Perhaps negative gearing should be limited too. Then there is the little matter of freeing up housing stock through the downsizer legislation. Surveys have been conducted with many senior Australians and the overwhelming response has been that they prefer to stay in their home than leave. You sell a $1.5m house to tip $600k into your super so you have (after sell and buy costs) only about $750k to buy again. Unless you want a sea change or a tree change you will likely not repurchase in the same street or suburb even. And beside who is going to buy your $1.5m house – the same young people who cannot afford to buy now? Please mind your own business and let people make their own decisions, just as they do if they smoke or drink. It may or may not be as good for you but then we all have an opinion.
Not that I needed any convincing, but this policy further confirms how anti superannuation and anti advice the Liberal Party is today. No wonder Hume says that they will not support the implementation of tax-deductible upfront advice. The Liberal Party doesn’t want people to get advice!
…and when the market returns to the pre-escalated price of $700,000 after the couple have put in $100,000 to buy their $800,000 property with a $700,000 mortgage… what happens when they are forced to sell at $700,000 due to divorce, interest rate stress, death or disability of a partner or a partner gets transferred out of state (I left out lockdowns).
How does the $100,000 get transferred back into super? Are they forced to stay until they can refund the super? Does the super sit with a note to say missing $100,000 please refer to Scomo?
This is a knee jerk reaction by a panicked liberal govt who don’t realise the answer to uncle Clive’s 3% is found in this pair of three words phrases I) sub-prime lending and II) Global financial crisis.
Morrison could then hose the bonfire down. It won’t be easy under Albanese!
Both parties seem to think that making something more affordable means assisting with cost but it doesn’t, it simply increases demand and increases prices. I would vote for a party that has the fortitude to address the problem for what it is and tack the problem head on. House prices are unaffordable because they are too high.
God what a carry on. The reality is young people in this case have to have 5% of own savings first so that ticks a box for savings, then “effectively” their super fund is investing in property with the homeowner. When they sell the house whatever percentage invested initially must go back to super (i.e. the capital and the gains). It’s a win/win for young people. It get’s young people out of the rental merry-go-round.
What happens when they want to upgrade their home? The amount initially borrowed plus a growth component needs to go back into super. Last time I moved, I needed every cent from the sale to be able to change homes. If you have withdrawn the $100K maximum for a couple and need to return that plus say another $20,000 for the 20% growth component, how are they going to afford the next home?? They’ll be stuck in the one house forever and never put the money back into super.
The biggest barrier to home purchase is massive stamp duties followed by a marginal tax system that punishes saving for a home loan. For a person on $100kpa to purchase a $500k unit with a 20% deposit they will have paid around $80k in taxes at settlement.
The record keeping to properly identify (minimise) the capital gain is horrendous. Every dollar spent on the property must be recorded – stamp duty, legal fees on the purchase, interest on the loan, insurance, council rates, water rates, (but not usage), the box of nails to repair the fence, painting, the kitchen reno, new appliances, curtains, the driveway, landscaping. The list goes on! Or the first home owner can elect to not keep records and then have a higher capital gain, and thus lose money which might have been earmarked for the second and better house…
How can anyone complain about our children, using their saved salary put into super, to get into their first home? I understand why industry funds are concerned as it will drop their management fees considerably.
The McKell Institute is an ALP-aligned think tank, so it’s hardly an impartial commentator here.
May, just maybe, the FSC and ISA only care because they know the level of outflows that will affect them. You don’t have the pass the FASEA exam to know a conflict of interest applies in their “concern” for housing prices.
Industry Super Funds are upset because they would need to use this mysterious asset class called “cash” and they wouldn’t be able to place, as an example, 100% into Brisbane Airport and call it a defensive asset. I guess they could just rename their Balanced fund as a Defensive fund.