Housing-Related Superannuation Measures

The federal government is calling for public submissions on its draft legislation on new housing-related superannuation measures announced in the 2017-18 budget.

The government announced a package which it said was aimed at reducing pressure on housing affordability, including through establishing a First Home Super Saver Scheme, and by allowing a special ‘downsizing’ contribution into superannuation.

According to Treasury, the draft legislation for the First Home Super Saver Scheme would allow individuals to save for their first home inside superannuation. Under the scheme, first home savers who make voluntary contributions into the superannuation system would be able to withdraw those contributions, and an amount of associated earnings, for the purposes of purchasing their first homes.

Concessional tax treatment would apply to amounts withdrawn under the scheme.

The draft legislation for the downsizing measure would allow individuals aged 65 years or over to make non-concessional contributions of up to $300,000 from the proceeds of selling their main residences to their superannuation accounts.

Downsizer contributions would be able to be made regardless of the other contribution caps and restrictions that might apply to making voluntary contributions. This measure would apply to proceeds from contracts for the sale of a main residence entered into (exchanged) on or after 1 July 2018.

Advocacy group National Shelter executive officer Adrian Pisarski told Pro Bono News the super proposal was not something his organisation supported.

“We see it as adding fuel to the inflationary furnace that is already going. These measures could actually push things out of people’s range rather than help in the long run. They tend to increase the demand pressure without doing anything to increase the supply,” Pisarski said.

“The government has followed the principle of reliability and trying to address a problematic social housing system and I understand how they went on all of that, but from our perspective the principle is about people’s access to affordable housing.”

The CEO of COTA, the peak national organisation representing the rights of older Australians COTA, Ian Yates said: “The measure allowing older Australians to contribute some proceeds from downsizing their home to superannuation to get the tax benefit may be positive.”

“Affordable housing is not just an issue for young first home buyers but a significant issue for older people now, and will become a greater issue over the next two decades; so it is pleasing the government is focusing more on this,” Yates said.

“However this is likely only to have an impact over the longer term as other drivers come into play for older people considering leaving the family home, and it will have to be monitored for unintended consequences.”

“Wealthier retirees will be the primary beneficiaries from the scheme, as those with lower wealth are at risk of losing pension payments at a rate exceeding their forecasted earnings from additional super contributed.

“Couples can have up to $821,000 and singles $546,000 in cash and assets outside their family home before they no longer qualify for a part-pension payment.”

Yates said for older Australians who were below this limit, there was no incentive to sell the family home to contribute extra cash into super, as the family home was exempt from the assets test for the age pension while superannuation was not.

“Many other issues affect older Australians “downsizing” or “rightsizing”, and most commonly the lack of supply of affordable and appropriate housing due to planning and zoning restrictions,” Yates said.

In the May budget speech Treasurer Scott Morrison said the government had chosen to “put downward pressure on rising housing costs” and outlined measures he claimed would “make a difference”.

“There are no silver bullets to make housing more affordable. But by adopting a comprehensive approach, by working together, by understanding the spectrum of housing needs, we can make a difference,” Morrison said.

As part of the package he revealed the Commonwealth would replace the $1.3 billion National Affordable Housing Agreement with a new set of agreements with the same funding, requiring states “to deliver on housing supply targets and reform their planning systems”.

He also announced a “bond aggregator” to be managed by a new National Housing Finance and Investment Corporation (NHFIC), set to be established by 1 July 2018.

Morrison also announced $375 million for a permanent extension of homelessness funding to the states, with a continued focus on supporting young people and victims of domestic violence.

But the social sector criticised the budget as “unfair” and said homelessness would continue to rise under the new measures.

Those interested in commenting on the Treasury consultation papers can do so before the closing date for submissions on Friday 4 August 2017.

Email: superannuation@treasury.gov.au For enquiries call Robb Preston +61 6263 2876.