Following the release of the Abbott government’s Intergenerational Report, which predicts Australia will have almost nine times the number of 100-year-olds it does today by 2055, Mr Hockey said Australians should be thinking differently about the role of super as the population ages.
“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, according to Fairfax reports.
“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.”
This is not the first time early access to superannuation has been brought up, with independent senator for South Australia Nick Xenophon floating the idea mid last year.
“There’s something strange about being able to access your super fund if you are about to default on your housing loan, but you can’t access it to put a deposit on a home in the first place,” he said at the time.
However, the superannuation industry has slammed Mr Hockey’s most recent suggestions, with The SMSF Association’s director of technical and professional standards Graeme Colley struggling to find any merit in the proposal.
“You have to look at some of the subsidies that come out of government through first home owners’ grants, stamp duty concessions and so forth,” Mr Colley told SMSF Adviser.
“It means that people either buy more expensive houses or the price of the house increases and those subsidies are virtually neutral.”
Mr Colley also questioned if investors under 30 would have a substantial enough superannuation savings to fund a home deposit, particularly in capital cities such as Sydney.
Expenses that are ordinarily linked to working life, such as housing, should also be kept separate to retirement income policy, Mr Colley added.
Quantum Financial principal and independent financial adviser Tim Mackay is also firmly opposed to the treasurer’s suggestion.
“Pumping another source of funds into an already overheated property market only benefits those selling properties,” Mr Mackay told SMSF Adviser.
“How on earth will [the] resulting increased house prices benefit younger people? Politicians sharing their thought bubbles in super does nothing for consumers’ confidence in the super system.”
There are also potential equity issues with this proposal, according to Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia.
“If people take money out of their super, it’s likely at some point they will replace it through salary sacrifice, make additional contributions and receive a substantial tax concession for this,” Ms Vamos said.
“This ‘double-dip’ into the tax concession pot is likely to be highly skewed towards high-income earners, who are more likely to have the additional income available to do this.”
I’m astonished at the backlash to the prospect of allowing younger Australians the opportunity to purchase their first home with their Superannuation monies, of which they are unable to access for 50 years, and quite possibly won’t be there in 50 years time anyway; quoting “will increase demand” and “unsustainable”; yet on the same hand, an outcry against banning LRBAs to stop richer SMSFs purchase additional investment properties – as if this wont also increase demand.
Why should young Australians be punished for elder Australian’s greed? Why should they not get the opportunity to purchase a home because the rich individual investors (by virtue of negative gearing) and larger SMSFs (by virtue of LRBAs) are snapping up all the cheaper, low end real estate?
This certainly is worth exploring as the best way young people can get interested in super early and it is the best investment they will ever make. Why in super , well consider the advantages; cannot be taken by creditors, banks if the member goes bankrupt from business or professional liabilities, gets a tax deduction to offset the interest cost of a home( where else can you do that?) replace negative gearing & its adverse effects on housing prices, keeps the home in a safe place, members can invest outside without risking their home, banks hate that! save tax as only capital gains & exempt in pension mode, if rented the income is 15% taxed in super, need I go on as these are just off the top of my head now!!!
Don’t be put off by the property spruikers who will miss their commissions on selling other property into SMSF. Pull you head out of the sand and show some initiative to get this country back on top with new ideas suited to this century and beyond.
GO FOR IT !!!
Dear Mr Hockey,
Our lesson today is economics 101. When you restrict supply from a demand supply equilibrium the price will rise.
When a government interefere’s with the demand side (by increasing first home buyers grants, stamp duty exemptions etc) you increase demand and the price will rise.
When you smash interest rates debt servicing per dollar falls which allows punters, and I use this term deliberately, to increase their leverage, prices will rise.
When you do all of these things prices rise a lot – guess what happened in Australia!!
I struggle to believe your job title is treasurer when utter such patently stupid ideas as accessing super to further shift he demand curve to the right. Utter irresponsibility which offers to further weaken the already perilous budget trajectory.
In economic 102 next week we’ll discover why investment in non income producing capital is also a dumb idea.
Elaine I agree. Super is NOT there to fund every difficulty that comes along (why is not some medical cost for very long term issues in kids just as important?) You certainly do NOT want creditors accessing super which in essence what is proposed.
Super should not be touched before retirement
And what happens when those people that dip into their super to pay for a property they can’t afford, lose that property and their super in one hit? Nothing to live in and much less to retire on. The purpose of super is to fund retirement. If people can’t afford to purchase a property perhaps they should look at other options, not rely on government handouts (AKA FHOG) or taking money out of super.
But this isn’t talking about buying an investment property Turtle, its for a home for ‘struggling’ FHB’s to get into the market. Who’s stupid…
[quote name=”Susan Wahhab”]It seems our treasurer doesn’t really understand what the “sole purpose test” mean! Super is for retirement, stupid.[/quote]Logically, buying an investment property could fund your retirement quite easily. Actually not that stupid at all.
Perhaps the superannuation industry should look at all the assets a retiree has accumulated over their working life. Getting younger people into the home ownership market and paying off their loan will allow them to access the equity in their home in later life.
It seems our treasurer doesn’t really understand what the “sole purpose test” mean! Super is for retirement, stupid.