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.
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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.