Opening super to first home buyers met with caution
While the superannuation sector has largely supported the proposed first home super saver scheme, some experts have cast doubt over the extent it will help first home buyers.
The government yesterday introduced a measure that will allow individuals from 1 July 2017 to make voluntary contributions of up to $15,000 per year and $30,000 in total to their superannuation account to purchase a first home.
The government said these contributions, which are taxed at 15 per cent along with deemed earnings, can be withdrawn for a deposit. Withdrawals can be made from 1 July 2018 and will be taxed at marginal tax rates with a 30 per cent offset.
PwC director of private clients Liz Westover said for young Australians trying to save for their first home, it’s a good incentive to save tax effectively and it doesn’t really compromise their super guarantee contributions for their retirement.
“I think that was always one of the concerns that we had, is that if people were able to tap into their super, it was then going to ultimately impact on their retirement savings,” Ms Westover said.
“What this does is give them the capacity to save in a tax effective environment without compromising those retirement savings.”
Colin Lewis from Perpetual Private, however, questioned how effective the measure would be in terms of addressing housing affordability for younger buyers.
“Every bit counts, and I do appreciate that, but it’s not going to make massive changes in terms of deposits for people in the Sydney and Melbourne markets,” Mr Lewis said.
“Especially when they’re working within the existing caps too. So you’ve still got the $25,000 cap applying and if you’ve already got compulsory employee super guarantee contributions coming in, there isn’t really any carve out for additional salary sacrifice contributions.”
However, Mr Lewis said it was an “incremental improvement with how much people have with a deposit”.
Importantly for the head of BT’s technical advice team, Bryan Ashenden, the scheme does not appear to disrupt the integrity or long-term compounding effect of superannuation.
“It’s for voluntary contributions only. It doesn’t impact the overall purpose of superannuation for retirement planning,” Mr Ashenden told SMSF Adviser.
Given that only funds that are voluntarily contributed can be used, Mr Ashenden said it is “really important” that super funds know the breakdown of their voluntary contributions versus their superannuation guarantee contributions. This is easier to track in an SMSF, considering the level of control and transparency members have over their own funds.
The SMSF Academy’s Aaron Dunn said also weighed in, saying that unlike the former first home saver account (FHSA) legislation that ceased following the 2014-15 federal budget, SMSFs appear for the first time to be able to offer these types of accounts.
The first attempt of the FHSA scheme announced back in 2008 was expected to bring about a flood of activity for new home buyers, but in reality it was a flop as a result of being an overly complicated and restrictive scheme.
“In horse racing parlance, this type of legislation does not have ‘good form’, so it will be interesting to see just how effective this reincarnation is,” Mr Dunn said.
SMSF Association chief executive John Maroney said the scheme offers superannuation funds, including the SMSF sector, an excellent opportunity to engage younger fund members in their super.
“The first home buyers’ proposal strikes the right balance between encouraging young people to save for a first home deposit in a concessional tax environment, but also protecting their retirement savings for the longer-term,” Mr Maroney said.