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Super for housing policy ‘undermines the system’


Industry groups raise serious concerns about the Coalition’s proposed Super Home Buyer Scheme.

By Miranda Brownlee 11 minute read

An ability to access up to $50,000 in super savings to help purchase a first home “undermines the core purpose of the superannuation system” according to industry experts.

The proposed scheme, outlined by Prime Minister Scott Morrison on Sunday (15 May), would apply to both new and existing homes with the invested amount to be returned to the buyer’s superannuation fund when the house was sold, including a share of any capital gain.

But the Australia Institute of Superannuation Trustees (AIST) said raiding super for a house deposit would drive up property prices and leave Australians with higher debt and depleted retirement savings.

AIST chief executive Eva Scheerlinck said it would “undermine the core purpose of superannuation system”.

“First home buyers are being asked to choose between a home and saving for their retirement, they should be able to have both,” she said.

“The Australian government must address this modern-day inequity by addressing supply issues rather than raiding super. A first home should not come at the expense of dignity in retirement.”

Ms Scheerlinck said the policy would significantly reduce asset diversification by further concentrating Australians’ savings in residential property while doing nothing to address the fundamental challenges of saving for a home, such as stagnant wages and rising inflation.

More needed to be done to address the supply of housing and superannuation should not be the “go-to” to fix systemic problems that were the responsibility of the government, she said.

“Superannuation was established to provide support for Australians in retirement and it is not a piggy-bank the government can open at its convenience to avoid dealing with the real systemic issues facing first home buyers,” Ms Scheerlinck said.

Financial Services Council CEO Blake Briggs said the proposal “weakens the sole purpose of superannuation, which is 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,” said Mr Briggs.

“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.”

Another part of the Morrison proposal lowers the age at which downsizer contributions can be made to superannuation from the sale of a home.

The FSC said that while 1.3 million households would now be eligible to make downsizer contributions, there are approximately 5.3 million under 35-year-olds who did not yet own a 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,” said Mr Briggs.

The Association of Superannuation Funds of Australia (ASFA) said none of the comprehensive reviews of superannuation had recommended its early release for housing deposits, while several had made recommendations to the contrary.

An ASFA report released in March 2021 said that the early release of superannuation for housing deposits was fundamentally inconsistent with the objective and central principles of superannuation.

It also said the direct effect on the housing market was increased purchasing power that “would be near fully capitalised into higher house prices, exacerbating the upswing of the current house price-credit cycle”.

Industry Super Australia (ISA) has also been critical of the proposal, saying it would add tens of thousands of dollars to housing prices.

Modelling undertaken by ISA estimated that it could see a hike in the nation’s five capital median property prices by between 8 and 16 per cent.

“The proposal is not what super was set up to do and would torpedo super fund investment returns for all Australians – forcing funds to carry more cash and be less able to invest for the long term – which has been the key in delivering members’ bigger nest eggs,” it warned.

ISA modelling estimated that allowing couples to take just $40,000 from super would send property prices higher in all state capitals, but the impact would be most severe in Sydney, where the median property price could lift a staggering $134,000.

ISA CEO Bernie Dean said 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. Super is meant to be for people’s retirement, not supercharging house prices and pushing the home ownership dream further away, Mr Dean said.

“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.”

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