Chapter 7Committee view

Broad observations

7.1While owning your own home in retirement is financially advantageous, there is increasing difficulty for people to enter the housing market, and limited options for people to use wealth tied up in superannuation to contribute towards this outcome. At the same time, most people die with wealth that they have not withdrawn during their retirement. These facts highlight an untapped opportunity for innovative uses of superannuation to access the housing market.

7.2The committee recognises that superannuation is already being invested in housing by older Australians who have retired or reached preservation age and that early investment in home ownership reaps lifelong financial benefits.

7.3The committee acknowledges concerns about supply-side effects from increases in the number of buyers able to enter the housing market. Therefore, the committee advocates for continued government focus on addressing housing supply shortages, alongside greater support for buyers to enter the market.

7.4Further, the committee notes that any inflationary effect from supporting buyers would be temporary and not significant if the correct policy settings are in place. In particular, any scheme to assist first home buyers should not be time limited, allowing buyers to enter the market at a time that suits their needs, rather than forcing buyers to enter the market all at once.

7.5The committee acknowledges that some policy options for using superannuation to access the housing market may lead to lower superannuation balances at retirement. The committee believes this trade-off is worthwhile as home ownership provides a level of financial and social security in retirement that cannot be replicated by a larger superannuation balance.

Superannuation withdrawal schemes

7.6Recognising the importance of home ownership to a sustainable and comfortable retirement and the widespread support for increasing home ownership among younger Australians, the committee recommends that the government implement a superannuation withdrawal for housing scheme to provide first homebuyers with access to their mandatory and voluntary superannuation contributions for the purpose of purchasing their first home.

7.7The committee acknowledges the need to target this scheme to the appropriate cohort of homebuyers to maximise the scheme benefits and assist those most at risk of poor retirement outcomes.

7.8The committee rejects arguments that a superannuation withdrawal for housing scheme would dramatically inflate the housing market. The committee is of the view that any increase in house prices would be temporary, negligible or no more than current trends and that any depletion in retirement income would be more than compensated by the capital benefits of home ownership.

7.9Repayment options for superannuation withdrawal schemes vary. However, the committee notes this repayment approach requires flexibility to account for cases where a boost to funding from superannuation is still required when purchasing a subsequent property. Subsequent property purchases may occur when upsizing to accommodate a growing family or moving to a new location. Therefore, the committee supports the ability for home buyers to use the proceeds of their first home sale towards a subsequent property, particularly in light of rising cost of living pressures and higher loan repayments.

7.10The committee recommends that first home buyers be allowed to withdraw their superannuation contributions for use towards a home deposit, without a withdrawal percentage threshold and with consideration given to the following withdrawal cap options:

(i) maximum withdrawal cap of $100 000;

(ii) maximum withdrawal cap of $150 000; or

(iii) no maximum withdrawal cap.

7.11The committee recommends that buyers who have used a superannuation for housing withdrawal scheme and subsequently sell their first home be required to recontribute the withdrawn amount into their superannuation account, including a share of any capital gain, within 12 months, unless they wish to use the proceeds of that sale to purchase their second home, provided they intend to live in that home, within 12 months of the point of sale.

Superannuation-based shared equity schemes

7.12The committee believes that a shared equity scheme in the form of co-investment of superannuation into a fund member’s home offers an innovative method to assist more homebuyers into the market in a shorter time period and is worthy of further examination.

7.13Reducing a purchase price using superannuation shared equity provides security of homeownership for the buyer whilst potentially offering less risk to fund objectives than superannuation withdrawal. Superannuation funds also benefit from entry into the residential funding market.

7.14The committee notes that there are a range of details and policy settings that need to be resolved. For example, a superannuation share equity scheme would have to contemplate scenarios where a member of a superannuation fund purchases a house through that fund’s shared equity scheme, and then subsequently switches to a different superannuation fund.

7.15Additionally, the role of APRA needs further consideration. APRA should be able to engage in the process of product rulings and is best positioned to balance the existing regulatory considerations of superannuation funds with new obligations that would be introduced by a superannuation shared equity scheme for housing. For this reason, the committee considers that APRA would need to be involved in the introduction of such a superannuation shared equity scheme to help navigate the regulatory environment.

7.16The committee recommends the Australian Government facilitate changes to enable Australian Prudential Regulatory Authority to produce draft prudential regulatory standards pertaining to a superannuation shared equity scheme for housing.

Superannuation savings schemes

7.17The committee acknowledges widespread support for the First Home Super Saver Scheme (FHSSS) expressed by submitters and other witnesses to this inquiry. The committee recognises the value the FHSSS has provided to first homebuyers and its positive effect on rates of home ownership among younger Australians.

7.18The committee considers that the take-up and accessibility of the FHSSS would be improved by streamlining the application process and simplifying the scheme.

7.19Accordingly, the committee recommends that the Government consider narrowing the eligibility criteria for the scheme and simplifying the tax treatment for voluntary contributions made under the scheme. The committee also suggests that the Government provide increased financial education and advice to younger Australians to improve the accessibility of the scheme.

7.20The committee notes that the benefits of the FHSSS would be enhanced by removing the $15 000 contribution and $50 000 withdrawal caps. Given the current withdrawal cap is less than a third of the deposit required on a median priced home, greater impact could be achieved though raising or abolishing the arbitrary limit.

7.21The committee considers that these caps unnecessarily restrict savings in the scheme, limiting its overall effectiveness for first home buyers. Accordingly, the committee recommends that the government abolish the contribution and withdrawal caps.

7.22The committee recommends that the Australian Government streamline the application process for the First Home Super Saver Scheme.

7.23The committee recommends that the Australian Government abolish the contribution and withdrawal caps for the First Home Super Saver Scheme.

Loan collateral

7.24The committee considers using superannuation as collateral for home loans could assist homebuyers enter the market sooner by reducing deposit requirements.

7.25The primary benefit of using superannuation savings as collateral to a home loan is that the balance of the savings remains within the superannuation fund, accumulating compound growth. Therefore, this approach does not risk depleting retirement savings, nor does it create a large repayment burden. However, the committee appreciates that home buyers would need to service larger loan repayments.

7.26Additionally, a super-as-collateral scheme would not need a balance limit imposed. The entire superannuation balance could be offered as collateral as it is not being removed from the superannuation fund.

7.27While an individual’s superannuation balance is at risk of being lost in the case of foreclosure, the committee notes that this is a very rare occurrence in Australia. Mechanisms should be explored to reduce the likelihood and impact of such an event. The age pension also remains available as a retirement safety net in this eventuality.

7.28The committee recommends that first home buyers be allowed to use their superannuation balance as collateral for a first home loan.

Senator Andrew Bragg

Chair

Liberal Senator for New South Wales