Explaining the Coalition’s plan to allow first homebuyers to use their superannuation

Use your super to buy your first home? Or let the government buy it with you? Labor and the Coalition have vastly different plans to tackle Australia’s housing crisis.

First homebuyers are struggling to get into the property market after soaring demand and prices during the Covid pandemic. But Scott Morrison has unveiled a new plan to help them get their foot in the door. Here’s how it will work.

What is the Super Home Buyer Scheme?

Prime Minister Scott Morrison announces his plan to allow first homebuyers to use part of their super to break into the property market. Picture: Jason Edwards

A Coalition government would enable first homebuyers to invest a “responsible portion” of their superannuation savings in order to get a deposit to buy a new or established home.

People will be able to invest up to 40 per cent of their total superannuation balance or a maximum of $50,000 per person – whichever is less.

It is expected to slash the time taken to save a deposit by three years, on average, as well as reduce mortgage and repayment sizes.

Who is eligible?

First homebuyers who have separately saved 5 per cent of the deposit. There are no income, age or property value caps.

Couples can access the scheme, if they are both eligible. One member of a couple not being eligible does not stop the other member from being able to access it.

When will it start?

The Super Home Buyer Scheme will start by July 1, 2023.

How will I access the scheme?

People must apply to the Australian Taxation Office.

Are there any catches?

It must be for an owner-occupier purchase and buyers must live in the home for at least 12 months.

What happens if I take the money out and I don’t buy a home?

If funds are released but a home is not subsequently purchased, the money must be returned to superannuation.

What happens if I sell the home?

The money taken out of the super fund to buy the house will be put back into people’s superannuation funds should the house be sold, including a share of any capital gain.

The Coalition says this will protect people’s long-term savings ahead of their retirement.

Will this scheme affect house prices?

The Coalition says this scheme will help people save for a deposit, which is a constraint for home ownership.

It says the Super Home Buyer Scheme is complemented by measures to increase housing supply and is incentivising people aged 55 and over to downsize their house.

But Industry Super has previously estimated a scheme like this would add between 8-16 per cent to median house prices in capital cities.

What is Labor doing about housing?

Anthony Albanese has backed the government’s scheme to let downsizers put more money into their super funds, as well as their Home Guarantee and HomeBuilder schemes. But he has also come up with a plan of his own that aims to get more people into the housing market. Here’s how it compares.

Labor leader Anthony Albanese at a Brisbane Labor rally. Picture: Sam Ruttyn

What is the $329m Help to Buy program?

Labor’s scheme would provide an “equity contribution” of up to 40 per cent of the price of a new home and 30 per cent for existing dwellings.

It says this will reduce the size of deposits, mortgages and repayments and make it easier for people to purchase a home.

Homebuyers will also avoid forking out for lenders mortgage insurance.

They can also buy additional stakes of at least 5 per cent in the home, when they are able to do so.

Who is eligible?

Up to 10,000 Australians aged 18 and over each financial year.

Individuals must have a gross annual income of $90,000 and under. Couples can earn less $120,000 or less.

They are required to have a minimum deposit of 2 per cent and be able to qualify for a loan for the remainder.

When will it start?

TBA

Are there any catches?

Eligible homebuyers will need a minimum deposit of 2 per cent. You also have to pay the stamp duty, legal and bank fees.

The home must be the principal place of residence and people cannot own any other land or property.

Price caps also apply depending on where you’re buying. In Sydney, properties worth up to $950,000 and under are eligible for the scheme.

What happens if I sell the home?

The government would take back its equity, while any renovations that increase the value will benefit the homeowners’ stake of the property.

What happens if the homeowner dies?

Only beneficiaries that meet the eligibility criteria can keep the home. Otherwise the property is sold, the government will get its proportion of the home back and the beneficiary will get their proportion paid out.

What happens if I start earning over the income caps?

If the homebuyers’ gross annual income is over the threshold for two consecutive years, they will be required to repay the government’s financial contribution, in part or whole, depending on their circumstances.

Will this scheme affect house prices?

Property Council chief executive, Ken Morrison, said given the shared equity scheme was limited to 10,000 places a year, it was “unlikely to distort housing markets or prices”.

How have people reacted?

There have been mixed reactions, with Labor saying it would put “fuel on the fire and make prices even worse”.

Industry Super Australia it was like “throwing petrol at a bonfire”, would inflate young people’s mortgages and add to the aged pension.

However, Master Builders Australia said it would keep the dream of homeownership within reach of Australians.

Originally published as Explaining the Coalition’s plan to allow first homebuyers to use their superannuation