One week out from the federal election Prime Minister Scott Morrison has made his move to once again change the rules around superannuation.
The idea of preserving superannuation for retirement is being tinkered with after latest Coalition promise to allow people to take up to $50,000 from their super to buy their first home – and return it upon the sale of their home (including any capital gain).
Under the proposed Super Home Buyer Scheme, first home buyers would be able to access up to 40 per cent of super, or $50,000. This could be added to the required five per cent of the deposit they must have saved. If re-elected the government’s new scheme would begin on 1 July 2023.
The coalition is also courting older voters, with the move to bring down the age where the downsizing rules kick in, from 65 to 55.
At a time when super funds are already struggling with liquidity issues, this latest move has received mixed reactions from the industry. While the downsizer measure has been broadly accepted, the early release of superannuation for housing deposits has been slammed as not helping cool the market for new entrants but inflaming the market further.
A McKell Institute report, undertaken 5 months ago in collaboration with researchers from the Centre for Housing, Urban and Regional Planning at the University of South Australia, projected the effect on the housing market should Australians be given access to their super for a home deposit.
Modelling for the report found that allowing prospective buyers to access $40,000 of superannuation would push up house prices and increase housing-related debt. The current Government proposal would allow access to up to $50,000 from superannuation.
| City | New debt ($b) | Median House Price Increase ($) – March 2022 |
| Sydney | 23.3 | 45,342 |
| Melbourne | 25.4 | 31,126 |
| Brisbane | 6.9 | 99,346 |
| Adelaide | 4.8 | 84,534 |
| Perth | 11.2 | 57,413 |
| Hobart | 1.3 | 92,796 |
| TOTAL | 73.6 |
This would see the median house price in Sydney increase by more than $40,000 and almost $100,000 in Brisbane, the report found.
The report was also sceptical that Australians who chose to invest in a house deposit instead of super would retire worse off, because the average returns in super are typically higher than house price growth.
“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.
“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.”
This current policy wouldn’t arrest the decline in home ownership. If you want to do that you’d look at where the gaps are – in lower – and middle-income earners, he said.
Grattan Institute senior associate Joey Moloney said the general take from the Grattan Institute is that main effect of the new policy would be to allow people on a decent income with decent superannuation savings who are buying a house to bring forward the purchase or buy a better home in the short term.
“Our numbers show the median balance for people aged between 35-44 in the bottom quintile of super savings is $0 in their super account, and for those in the next quintile it is $15,000,” Moloney said.
Similarly, the Association of Superannuation Funds of Australia said allowing superannuation to be used for housing would be both ineffective in improving housing affordability and would significantly impact the ability of Australians to have a dignified retirement.
“ASFA supports the downsizer measure announced earlier today as it will help increase the housing stock for families and the retirement balances of older Australians,” ASFA deputy CEO Glen McCrea said. “However, the early release of superannuation for housing is not a panacea, is not in line with the objectives of the system and will have long-term consequences for retirement incomes.”
Financial Services Council chief executive Blake Briggs added his concern. “The FSC is concerned the Government’s proposal weakens the sole purpose of superannuation, which is to provide higher standards of living in retirement.”
And while he says the FSC recognises there is a correlation between renting in retirement and poverty amongst older Australians, he adds that people should not have to choose between a home and their retirement savings.
“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.”
Chief executive of The Australian Institute of Superannuation Trustees (AIST) Eva Scheerlinck said: “First home buyers are being asked to choose between a home and saving for their retirement, they should be able to have both. 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.”
“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,” she continued
From the funds, UniSuper chief executive Peter Chun was also welcoming of the age eligibility reduction of the downsizer contribution but said, “at first glance the Super Home Buyer Scheme announced today would have little effect on housing affordability and potentially effect retirement adequacy of our members.”
