OPINION | The nicest thing I can say about the government’s new First Home Super Saver Scheme, proudly unveiled by Treasurer Scott Morrison as part of the federal budget on May 9, 2017, is that it will have little impact.
On the one hand, it is great news that the Turnbull Government did not go down the path of letting young people tap their compulsory employer super contributions early to fund a first-home deposit – as it was reported they might. Such a move, while it responds to young voters’ reasonable cries for some help cracking into the property market, would only inflate demand and push up prices.
The compromise the government has come up with is an incentive to encourage would-be first-home buyers to make up to $30,000 in voluntary super contributions that can be released early to go towards their deposit.
This is set to help a small number of young savers, mostly those still living at home with financially savvy parents, and won’t do much harm – but it also won’t do much to solve the nation’s housing affordability problem.
Likewise, the budget’s “downsizer” provisions might prompt a few well-heeled empty-nesters to downsize from their $3 million home into smaller digs. But for the vast majority of older people, the tax advantages will be negligible. The close to 80 per cent of retirees who rely on eligibility for
a full or part age pension payment have a disincentive to use the
downsizer provisions.
It’s all window dressing to distract voters while the government dances around the need to boost supply and tackle reform in key areas like negative gearing, capital gains tax, SMSF borrowing, and the enforcement of foreign ownership rules.
As Women in Super executive officer Sandra Buckley noted, these budget measures, sold as tools to improve housing affordability, risk further entrenching the divide between those who can afford to make voluntary contributions and those who can’t. And that serves to widen the already yawning gender gap in retirement income standards.
Half the female workforce earns less than $37,000 a year. In the unlikely event that these women could save for a home deposit, there would be minimal or no tax advantage to doing so through superannuation. Depending on how it interacts with the low-income superannuation tax offset, it could even place them at a disadvantage.
While changes announced as part of the budget to encourage managed investment trusts to invest in affordable housing are a small step in the right direction, they fall well short of the hoped-for tax reform and establishment of institutional-grade housing bonds.
It is also disappointing that the budget failed to implement a single recommendation from the 2016 Senate inquiry into women’s economic security in retirement.
Sally Rose is the editor of Investment Magazine. This article first appeared in the June print edition of Investment Magazine. To subscribe and have the magazine delivered, CLICK HERE. To sign-up for our free regular email newsletters, CLICK HERE.
