Reece Agland & Associates principal Reece Agland has said that while few people will take advantage of the First Home Super Saver Scheme, it will be mainly the wealthy who can afford to give their children money towards a house.
“From my discussions with younger people, they just don’t have those savings there to put into super — it’s great if they do have that, but a lot of them don’t. The cost of living so high in Australia at the moment, that they just don’t have the spare cash,” said Mr Agland.
“The people who might be able to take advantage of it are wealthy people who can give their kids some money and the kids can then put that money into their super. I don’t think that was the intent of the legislation.”
Mr Agland said this is what mostly happened with the First Home Saver Account initiative from the government, where the government made extra contributions for amounts that deposited into the account.
“The only people that could really do that were the wealthy so it didn’t really work out,” he said.
“You’ve got to question whether the First Home Super Saver Scheme is really worth it for the complications that it’s going to cause in the system.”
Mr Agland said he expects there will be a lot of difficulties in administering the system, especially for super funds themselves.
“I think a lot of [the industry] might put it off to see if it’s taken up by anyone because it’s going to be quite complicated for them to set those amounts aside and the earnings aside, and then attribute those amounts so they can be taken out again,” he said.
“You’ve got to question is it worth their while to do that if not many people are going to take it up?”
The First Home Super Saver Tax Bill, which sets out the details of the scheme, is currently before the House of Representatives.
One problem I fail to understand under this stupid proposal is what happens if a couple subsequently go their separate ways. What protection would be put in place to protect an individual’s superannuation contribution. As is so often the case one of the parties will get stung and no allowance made for a members’ lost super entitlements .
Got to agree with Sean on this one.
This argument cuts straight to the core of the problem with the majority (if not all) of the substantial problems behind super changes designed to benefit the “lower income” population. This applies across all facets of super not just this specific issue.
It is exceedingly hard, if not impossible, to justify putting money into super (that in most instances you wont see again until you are 65) when you are struggling at a day-to-day level to make bank.
Successive and varied governments have all tried to both cut down on “avoidance” strategies that benefit the wealthy and to encourage the saving of younger, lower wealth and economically disadvantaged peoples.
The problem with a lot, if not all, legislation based around this is that it a)ignores the fact that you generally need to be wealthy enough to have large portions of disposable income, or have saved the money anyway to take advantage of it (say concessional contribution banking) or b) they have neglected the diminishing value of money (say for instance a transition strategy that nets someone with $20m an extra $5m, as opposed to a transition strategy that nets someone with $400k and extra $100k – they are proportionally the same thing, but $100k to the person with only $400k is much much more valuable than $5m to the person with $20m).
The system needs to be rebuilt from the ground up, it needs to be built so that it is progressive, it needs to legitimately and usefully incentivise saving to superannuation early in life, it needs to recognise people’s wealth outside of the super system and it needs to prioritise savings bonuses for disadvantaged peoples.