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Pros and cons of the Liberal Party’s new super first home buyer scheme
The number of first home buyers could rise on the back of a new proposal to allow Australians to use part of their super to buy their first home. However, the scheme favours those with larger super balances and has the potential to push up property prices.
If re-elected, the Liberal Party would allow first home buyers to access up to 40 per cent of their super to purchase their first home, up to a maximum of $50,000. Couples buying together could access up to $100,000, provided each person stays within the 40 per cent cap.
First home buyers would have 12 months to purchase a property after accessing their super, however, this money would have to be returned when the property is sold, plus a share of the capital gains.
Buyers would need to live in the property for 12 months, after which point, they can rent it out.
Unlike other programs, this proposal would be open to all first home buyers, regardless of income. This means first home buyers with larger salaries and higher superannuation balances will be able to withdraw larger sums of money to purchase a property.
RateCity.com.au also understands there is no requirement to spend the money directly on a deposit, provided they buy an owner-occupier home within 12 months of accessing the money.
Using your super to help buy your first home – potential pros and cons
| Pros | Cons |
| Help first home buyers get into property market sooner. This would see them stop paying rent sooner, have greater control over where they live, renovate and potentially take advantage of capital gains. | Increase in first home buyers could push up demand when the scheme launches and therefore property prices. |
| A larger deposit could help people borrow less from the bank, reduce their loan size and monthly repayments and have a bigger buffer. It could also remove the need to pay lenders’ mortgage insurance (LMI). | Having access to more money could encourage people to buy a more expensive home instead of buying with a bigger deposit, with no reduction in LMI or loan size. This could also push property prices higher. |
| Impact on retirement savings is minimised as the super needs to be returned on sale of property plus a share of the capital gains. | Repaying the money at the point of sale will be an extra expense for those looking to sell and buy their next home. |
| People will own their own home outright, compared to the Labor scheme where you co-buy with the government. | People with low super balances will be able to access less money, limiting the benefits for these first home buyers. |
Median super balance by age, ATO figures
| Median account balance | Maximum withdrawal amount per person | |||
| Age | Male | Female | Male | Female |
| 18-24 | $4,131 | $3,772 | $1,652 | $1,509 |
| 25-29 | $17,495 | $16,956 | $6,998 | $6,782 |
| 30-34 | $38,764 | $32,904 | $15,506 | $13,162 |
| 35-39 | $65,220 | $50,108 | $26,088 | $20,043 |
| 40-44 | $92,303 | $65,840 | $36,921 | $26,336 |
| 45-49 | $118,686 | $80,303 | $47,474 | $32,121 |
| 50-54 | $139,444 | $92,671 | $50,000 | $37,068 |
| 55-59 | $162,337 | $109,639 | $50,000 | $43,856 |
Source: ATO taxation statistics for the 2018-2019 financial year, updated on 14 April 2022.
RateCity.com.au research director, Sally Tindall, said: “This is yet another scheme from the major political parties that does nothing to address the cause of the problem, which is that property prices are too high.”
“Providing prospective first home buyers with a wad of extra cash from 1 July next year has the ability to put a jet under property prices at a time when things might otherwise be finally coming back down to Earth on the back of rising rates,” she said.
“The biggest winners are likely to be those who already own property, because first home buyers will be handing them their hard-earned super as part of their deposit, potentially for a higher purchase price.
“While the other first home buyer proposals from the major political parties do little to bring property prices back under control, they are targeted at those who need assistance the most, with caps on the number of places, limiting any impact on property prices.
“Under this new proposal there’s a cap on how much you can take out of your super, but no cap on how much people can earn, the purchase price of the property or the number of buyers who can access the scheme.
“As a result, people who won’t have difficulty buying their first home could still use this scheme to access extra cash, fuelling a property market that’s prone to sparks.
“People with low super balances, many of which are young Australians and women, won’t see a big boost to their deposit, but they will have to wear any property price rises that come on the back of the policy change.
“The government has done the right thing by asking people to return that money to their super, plus a share of any capital gains to ensure their nest egg doesn’t take a significant hit.
“However, anyone planning to sell and buy a bigger property, will need to budget this cost in before they make their next move.
“One thing that could give first home buyers a real chance at getting into the market is to remove or dilute tax incentives for investors, however, this is a political hot potato neither major party is willing to touch,” she said.
Disclaimer
This article is over two years old, last updated on May 17, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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