ScoMo’s super scheme for first home buyers divides critics
Article by Roisin Kelly-Goldsmith
You may have heard the latest Federal Budget includes a tax incentive that will allow first home buyers to save up for their mortgage deposits faster, in a policy the government hopes will improve housing affordability.
Most Aussies working towards their first property purchase “will be able to accelerate their savings” with this plan, according to Treasurer Scott Morrison who announced the news in a speech last night.
Dubbed the “First Home Super Savers Scheme”, the initiative will soon allow workers saving up for their first home to increase their superannuation contributions by up to $15,000 a year, above the minimum requirement which currently applies at 9.5% of their annual salaries.
Once the salary being sacrificed builds up to a total of $30,000 - set to take at least two years under the plan - first home buyers would then be required to withdraw the money for the purpose of buying a property. Couples will be allowed to pool their funds together under the scheme too.
While Morrison (ScoMo) admitted that “there are no silver bullets to make housing more affordable,” stakeholders in the super fund industry believe that introducing salary sacrificing incentives is not the answer.
"The proposal is deeply flawed and the thin end of the wedge for super savings - threatening workers future retirement", said the Chief Executive of Industry Super Australia (ISA), David Whiteley.
He also said that the plan goes against “the sole purpose test for superannuation by allowing withdrawals from super other than retirement”.
"If implemented, the policy is likely to be expensive to administer and will impact the ability of fund trustees to invest contributions over the long term,” Whiteley added.
While the new scheme may have its critics, Mozo’s in-house property expert, Steve Jovcevski believes the plan could help young Aussies get ahead.
“While buying a first home is tough, I’d urge young workers to take advantage of the scheme and act on this fast while investors lie low. The sooner you buy into the market, the easier it will be”.
Jovcevski’s view is that the crackdown on investor lending such as by the Australian Prudential Regulation Authority will likely have an impact on buying confidence in the short to medium term, giving first home buyers a window of opportunity to step on the ladder.
“ScoMo has slammed the investment market in the Federal Budget with the 50% cap on foreign investment approvals, not to mention those new ghost tax penalties that apply when they leave property vacant for more than six months of the year,” he added.
Australians will have the opportunity to access the First Home Super Savers Scheme on July 1.
Recap of the First Home Super Savers Scheme:
First home buyers will be given the opportunity to “sacrifice” up to $15,000 of their salary each year and funnel the funds into their superannuation account, meaning no separate account is required. The benefit of taking this up is that the savings will only get taxed at 15%, just like regular super contributions. On the downside, Aussies who take up the scheme will be forced to withdraw the money once they reach a $30,000 savings threshold.
The scheme does not allow first home buyers to simply dip into their existing super contributions, but give them the choice to make additional contributions on top of the compulsory 9.5% required by law.