Hockey’s hints at early access to super slammed
The superannuation industry has hit back at Treasurer Joe Hockey’s suggestion of allowing Australians to use their superannuation savings throughout their lives to fund expenses such as property.
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."