Governments of both sides have for many years contemplated allowing access to superannuation for housing — in fact it goes right back to the birth of compulsory super in the Keating years. Every few years, one side or the other comes back to the idea and kicks the tyres.
But there are only two groups who would benefit from allowing first home buyers to access their super: homeowners, who are already the recipients of an entire suite of massively expensive policies inflating their home prices; and high-income earners, who will be able to take advantage of the generous tax treatment of superannuation in a new way.
It’s not merely that, as Finance Minister Mathias Cormann has pointed out in the past, allowing access to super would just pump more money into the housing market, driving house prices up further. Assistant Treasurer Michael Sukkar acknowledged this today when he said it would need to be coupled with measures to increase housing supply. Except, housing supply would need to be increased enough to offset the impact of a significant increase in demand before there would be any net benefits. What chance the supply measures accompanying a super change are tangible and end up with real results, let alone results large enough to more than offset the increase in demand?
It also means taxpayers lose out in the long run; lower super means a greater likelihood that people who have used super for housing will rely on the aged pension because their super isn’t sufficient. And don’t forget, the family home the super is buying is not subject to a means test for the age pension. So the taxpayers of future decades will be paying for a big handout to existing homeowners — yet another form of intergenerational theft.
[Keane: the next stoush on superannuation is coming]
And how quickly do you think it will take for tax planners and financial advisers to work out the best way for high-income earners to use it to invest in the tax-free asset that is the family home?
There’s a larger reason why it’s such a bad idea. So many policy settings now punish younger Australians in ways their parents were never punished. Higher education now comes with significant debt — and the Coalition wants to increase that debt so that Australians will start their working lives with a six-figure debt even before they enter the housing market. Vocational education has been a disaster area of privatisation experiments run by both sides of politics. Climate policy, or lack thereof, means young Australians will live with the increasing costs and lower economic growth that will result from the impacts of climate change on Australia. And we subsidise wealthy Australians to use negative gearing to buy housing in competition with market entrants, incentivised by the way capital gains tax is structured.
The one policy setting from which younger Australians benefit is compulsory super and its tax treatment, which means they will enter retirement later this century with the basis for a comfortable retirement without having to rely on the age pension. This is subsidised by the current generation of taxpayers via super tax concessions. Allowing it to be redirected to address the consequences of a deliberate policy of imposing costs on first home buyers would diminish the one good thing policymakers are doing for our younger citizens — yet again in favour of my generation and baby boomers.
The way to systemically address housing affordability is clear. Everyone, even the property industry, knows it: curb negative gearing and direct it toward new home construction and reduce the concession afforded by capital gains tax arrangements. Too gutless and visionless to pursue those reforms, the government instead wants to find yet another way to punish young Australians.
One thing about the housing market that does not seem to be discussed is the rent assistance help that some people get which goes directly from the government to the landlord. This is a subsidy necessary for those poor or on the dole, but a nice little earner for the negatively geared. I reckon that rent controls are what is needed. My daughter lives in Spain, has been in the same flat for years–20 or so–and they have no difficulties about being forced to relocate or have their rent raised to unreasonable levels. The government also should be creating housing for people as they did in the past. The capitalist version is not working and we are heading down the path to where necessities are controlled and charged for by private interests.
But there are only two groups who would benefit from allowing first home buyers to access their super: homeowners, ……………….. and high-income earners”
So, likely to get up then!
I also recall Malcolm Turnbull belling this cat-turd. It always comes back, smellier than before. Saul Eslake did a pretty good job of demolishing all these price inflating mechanisms, mostly delivered by the liberals.
A pox on all their negatively geared houses.
John Alexander MP is advocating cash for super but with the caveat that the super fund actually owns the home, not the individual. In principle, this could have some merit – however it opens up a can of worms when it comes to estate planning and family court matters.
Just address the most obvious low-hanging fruit .. that being CGT concessions as a step 1, see how that goes .. then proceed to negative gearing rules themselves. It ain’t rocket science!
The majority of our sitting federal MPs have investment properties. However, if negative gearing is abolished (& not made retrospective) they would all be safe.
So, vested interest protected, why won’t they make a genuine effort to relieve over-priced housing?
If super money is used for property acquisition it will dissolve into thin air when our bloated real estate market inevitably tanks.
Because it’s gone way beyond the problem of first home buyers being priced out of the market (by the insane tax policy Ponzi scheme).
The terrifying reality is that three decades of incoming cheap money, sluiced by said insane tax-sidestepping policies (unlimited negative gearing, the CGT rebate and lately, the capacity to supercharge your SMSF with property-investments) has served to skew and now entrap our entire domestic economy into said Ponzi scheme. Like small but disastrously mis-engineered valves high up in the start-trickles of our economic Snowy River, those three pissant, vote-harvesting, boring housing tax policies – harmless little ‘tweaks’, right? – have together, in a sustained low interest rate climate, directed our once-in-a-national-history boom bounty away from productive, 21st century re-positioning investments, and into an…artificial, temporary and utterly meaningless ‘rise in price’ for our piles of bricks.
It’s an economic catastrophe way, way beyond our kids not being able to buy a house. It’s the missed opportunity of a national history. When we could and should have turned into Norway, we turned into Florida. Except unlike Americans, we can’t just give our keys back to the bank, and start from scratch.
No politician wants to be the one to make the Ponzi scheme collapse, because that’s when the above will become agonisingly clear. Even to free market economists, bank CEO’s and highly-qualified politicians.
Shhhh, Zut. Shhhhh. Ponzi is sleeping. Shhhhh.
Glad you brought up the SMSF with property investment thing Jack. It has been largely missed. I was disgusted at the time and thought this was just going to super-charge an already ridiculous housing sector.
Was Treasury a part of that clusterf#@% or did the pollies do that on their own? Again, I think it was that monster of a Treasurer, Peter Costello, with another ticking time bomb waiting to obliterate us, but will accept it if someone tells me otherwise.
A grotesquely stupid idea.
Hey Dog’s. What’s consistently maddening about this policy area is the way governments quickly recognise the destructive, unintended-consequence lunacy of the tax incentives but fail to apply Occam’s Razor in response. Investors pile in to grab the CGT discount bounty? No, let’s not remove or temper it: let’s get APRA and the banks to bolt clumsy and useless external ‘fixes’ on top of them. Let’s throw Sisiphean-futile catch-up money at our kids. Let’s access super. Let’s offer 70% mortgages. Let’s fly a magic unicorn to that magic land where houses remain simultaneously incredibly valuable to already own but also cheap to buy.
And on SMFS? It became instantly obvious – from an investment heat point of view – that they were brilliant ways to access property capital gains at ZERO tax (via SMSF bare trusts, in pension pay out mode). But instead of just banning the adding of property to the super goody-bag, we got ludicrous opaque, indecipherable, highly-subjective, and impossible to police bolt-on ‘rules’ about how you can play with properties inside your fund. In other words, they concede the core policy intervention screw-up: but respond with more intervention, not less. It is the opposite of the free market mantra with which they have assailed my working life relentlessly for my entire life.
Ah, Dog. The energy, the sheer mental demoralisation of trying to engage, to ‘be dutifully governable’, upbeat, be democratically optimistic about the economic managers who are systemically making my life incrementally grimmer, harder, less sparkly, all on the altar of ‘market theory’, but who refuse to apply it where it is most needed. It’s why I scream and swear and am so ranty. It’s also why people like me vote for people like Trump. Because people like Turnbull and Morrison smile and condescend and sternly lecture me to be polite and civilised and ‘calmly central’ no matter how grotesque their double standards.
I think I just want the entire system to collapse now, Dog. I think I want catastrophe, anarchy, I want violence and destruction in the street. And that saddens, and appals, and frightens me. But at some point, the only sane and rational response to irrational insanity is to out-do it.
Bernard…one thing you haven’t mentioned, is what happens to those who don’t own a home on retirement? Just about everyone I know (retired folk) say that if you don’t own your own home, life is a struggle for those who
haven’t accumulated large super or other investments.
So…when these ‘super rich’ youngsters of today retire, they will have to spend most, if not all, of their retirement ‘nest egg’ on (you guessed it) buying a home.
There has to be a better way!