Hockey’s super proposal a ‘double-edged sword’
Implementing Joe Hockey’s proposal for using super in the purchase of a first home will further encourage “Australia’s misguided love affair with property” and damage retirement savings, says a financial services analyst.
Speaking to SMSF Adviser, Wealth Within chief analyst Dale Gillham said allowing people to purchase their first house with their superannuation savings will not be helpful in funding their retirement.
“People just borrow up to their limits, use their house to borrow even more and waste their money,” said Mr Gillham.
“Therefore we need to keep as much money in their super as possible, letting it compound and build up.”
Mr Gillham said superannuation money should stay as an investment for the future, as the family home is not about retirement.
“You’re not going to think about the family home from an investment point of view – buying a family home has nothing to do with retirement, it’s a lifestyle choice,” he said.
“To me, [this proposal] is a double-edged sword; the government plays with superannuation all the time resulting in never ending changes.”
Mr Gilham said while he understands the government wants to help younger people get into property, “Australians need to get smarter”.
“Australia’s love affair with property is very misguided. It’s actually far more profitable just to be a renter and invest in shares and property [you don’t live in] because of the tax deductions and the fact it’s a much better way to create wealth for retirement,” he said.
Having your own property with your name on the title, Mr Gillham said, is something Australians should get out of the habit of.
“It’s not actually very productive for you because all you’ve done once you sell the house at the end of a 30-year period is pay the capital cost into the house and the bank interest – it’s just enforced slavery.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.