$50k deposit: How Scott Morrison’s Super Home Buyer Scheme works
The Liberal Party has announced a key housing policy for first home buyers, just a week out from the federal election.
Prime Minister Scott Morrison has announced that if re-elected, he will allow first home buyers to withdraw up to $50,000 from their super funds to use as a property deposit.
Describing your super funds as "your money", Morrison confirmed eligible first-time buyers would be able to withdraw funds if they meet certain criteria.
"Under the Super Home Buyer Scheme, first home buyers will be able to invest up to 40% of their superannuation, up to a maximum of $50,000 to help with the purchase of their first home," Morrison said.
At a glance: Super Home Buyer Scheme
- You must be a first-home buyer
- You can't have owned any property before, either to live in or as an investment
- You can withdraw up to 40% of your super balance, to a maximum of $50,000
- You must have also saved a 5% deposit
- You must live in the property for at least 12 months
- No income thresholds apply
If the Coalition is re-elected, the scheme is set to start on 1 July 2023.
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Previous Liberal prime ministers John Howard and Malcolm Turnbull, as well as former treasurer Peter Costello, have rejected any type of policy that involves accessing superannuation for a house deposit.
This surprise policy, which comes just a week before Australians head to the polls to vote in the federal election, was announced in response to Labor's new housing plan, which would see the ALP co-buy properties with first home buyers, contributing up to 40%.
Economist Saul Eslake said any policy that involves first home owner grants, stamp duty concessions, mortgage deposit guarantee schemes or shared equity schemes has historically resulted in higher house prices, rather than in higher rates of home ownership – and this scheme is no different.
"There is no annual cap on the number of people who can take up this 'offer', unlike on the government's deposit guarantee schemes, or Labor's 'shared equity' scheme; nor are there any limits on the income of applicants or on the value of the property purchased using the scheme," he said.
"The only constraining factor is likely to be – how many aspiring first home buyers have that much money in their super?"
What impact could this policy have on your overall wealth?
On the one hand, it could help you get into the property market sooner. Owning a property is a common method of building wealth.
However, this policy comes with so many criteria and caveats. For instance, a key part of the policy includes a requirement for homeowners to return the initial super amount they withdrew, along with an equivalent proportion of the capital gain or loss, when you eventually sell the property. This translates to an awful lot of government involvement in your household finances.
For example, if you withdraw $50,000 and use it to help you buy a property for $600,000, and 10 years later you sell the property for $900,000 (a gain of 50%), you'll be required to repay the initial $50,000 you withdrew from super, plus a portion of the $300,000 gain (the exact way the government would calculate this isn't quite clear).
Also keep in mind that any money you take out of your super today, impacts you down the track. You might think that's a "future me" problem, but it's proven that the earlier you start saving and investing for your retirement, the far more financially comfortable you'll be when you leave the workforce. The average figure the industry quotes for super returns over the long term is around 7.5% growth p.a., which means swiping $50k from your fund this year could see you miss out on decades of compounding wealth.
Taking $50k out of your super to buy a house: Good idea or big mistake?