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Dip into your super for your first house and give it back when you buy your second

According to the latest if-elected announcement the great Australian dream of home ownership will be unlocked for thousands of first home buyers by being able to dip into their super. The idea proposed is that first home buyers will be able to invest up to 40 per cent of their superannuation, (up to a maximum of $50,000) to help with the purchase of their first home.

Basically it means first home buyers can buy their first home sooner by cutting the time taken to save a deposit. Apparently the invested amount is then to be returned to their superannuation fund when the house is sold, including a share of any capital gain. Buy first home now, use your super up to $50,000. And then when you buy your second home and sell the first you can give the money back to yourself with a little capital bonus. But what if the bubble bursts? What if they buy a house for a million and the market slumps because of adjustments? What, as we have seen already the new home loses value over night by $100,000 yet the mortgage repayment is still on a $million home. There is a major discrepancy between the performance of money in a superfund compared to the interest from banks. Once the money is taken out of the fund the domino effect is that projected super income is reduced substantially as it compounds. This is not a policy that will help young people it will mean working class kids will just be left further and further behind. It is interesting that the scheme refers time and time again to "your first house". The intention of the super contribution was to ensure everyone can retire in dignity and be less of a burden on the system.

This isn't the first time the rues have changed around super. During Covid you were able to take out $10,000 from your super fund to cover financial difficulties. This caused a run on the super funds and stripped them of millions of dollars. The impact was swift and it will take a decade or two to recover. This latest idea will once again see an exodus of dollars from super funds. It will pump billions in superannuation into the housing market, significantly pushing home prices up in the short term until supply then overtakes demand and sees values drop.

During the launch the Prime Minister said “Allowing your super to work for you to purchase your first home and then being returned to your super at a later date achieves the best of both worlds - home ownership and retirement security.”

It is understood that there will be no income or property caps under the scheme with eligibility restricted to first homebuyers who must have separately saved five per cent of the deposit.

But why stop there. Why not allow families to withdraw super to pay for essential health costs, children's education and even an upgrade to a solar roof or electric car. Accessing super for first home will drive up house prices The Australian Institute of Superannuation Trustees (AIST) has raised serious concerns about the impact on housing prices if the Morrison government’s proposal to allow access to superannuation for first home buyers becomes a reality, as well as undermining of the core purpose of the superannuation system. “Accessing your super early won't get you closer to your dream home or fix Australia's housing crisis. Using super as a deposit will drive up property prices, leaving Australians with higher debt and depleted retirement savings,” CEO of AIST Eva Scheerlinck said. “First home buyers are being asked to choose between a home and saving for their retirement, they should be able to have both. The Australian Government must address this modern-day inequity by addressing supply issues rather than raiding super. A first home should not come at the expense of dignity in retirement.” “Today’s policy announcement by the Morrison government ignores all of the research on housing affordability triggers and will further inflate house prices. This is an ill-informed and ill-targeted measure, and all Australians should be aware of the dangers of this proposal,” Scheerlinck said. It would also significantly reduce asset diversification by further concentrating Australians’ savings in residential property while doing nothing to address the fundamental challenges of saving for a home, such as stagnant wages and rising inflation. Individuals should not be expected to sacrifice their quality of life in retirement because housing is unaffordable. More needs to be done to address the supply of housing and superannuation should not be the ‘go to’ to fix systemic problems that are the responsibility of government to address. “Superannuation was established to provide support for Australians in retirement and it is not a piggy-bank the government can open at its convenience to avoid dealing with the real systemic issues facing first home buyers.”

If you take $20,000 out of your super in your twenties, due to compound interest it would have been worth around $180,000 by the time you retire.

Morrison's plan for you to put back $20,000 if you sell your house means your retirement super would be $160,000 worse off.

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