The Committee for Economic Development of Australia (CEDA) has resurrected the idea of using superannuation to fund first home purchases – a concept raised by Treasurer Joe Hockey in March.
The think tank launched a paper titled The super challenge of retirement income policy yesterday, which proposes that first home buyers be allowed to access their superannuation funds to purchase owner-occupied housing.
CEDA chief executive Professor Stephen Martin said the impact of sustained housing affordability issues is only just beginning to be recognised as a significant issue for retirement policy.
"However, if it is not addressed the long-term consequences could be significant with an increasing number of people living in poverty in retirement and unsustainable fiscal pressure on the federal budget," Mr Martin said.
The report also recommends making the family home part of the assets test for the age pension and changing superannuation payments to an after-income tax payment, with all other super tax concessions removed.
"Alternatively, mortgage payments on the family home could be allowed to be made pre-tax," Mr Martin said.
"Implementing one of these options would allow for two important components of retirement savings – superannuation and the family home – to be treated the same."
The Association of Superannuation Funds of Australia (ASFA) expressed "deep concerns" about some elements of the proposed reforms.
ASFA chief executive Pauline Vamos said allowing people to access their superannuation to pay for a house would have a "significant negative impact" on their retirement incomes.
"People who dip into their super early will likely have a substantially lower superannuation balance at retirement, and first home buyers are also likely to be diverting funds in their 20s and 30s – the time when they will be getting the most compound growth from their superannuation balance," Ms Vamos said.
"While those who rent do require higher incomes in retirement, using superannuation to fund house purchases is merely reducing one asset to pay for another."
Stimulate new ideas. Stimulate new thinking. Top up your CPD and hear from industry experts with InvestorDaily’s Knowledge Centre. Keep up to date with the latest trends and reforms, all while adding to your CPD. Explore the knowledge centre Knowledge Centre now.
Despite unemployment falling to pre-pandemic levels, the central bank still thinks it’s too early to count its chickens on the success of ...