The big super question: Tummy tuck or home?

You can access your super for tummy tucks and IVF, but not to invest in a home. Picture: iStock

Just now money is pouring out of the super system to pay for tummy tucks and IVF, but you can’t access your own savings to invest in a home.

No wonder the Coalition’s ‘super for housing’ policy has the big super funds on the run – any early access to super for home buyers would be instantly popular.

As ‘big super’ allows an eye-popping range of early super withdrawals with barely a murmur of concern, even the mere prospect that super could be tapped for home finance has produced a rearguard action. Two industry reports in as many months outline how using super for home purchases would push up prices.

At the heart of the issue is the Coalition’s Super Home Buyer Scheme, a work in progress which would allow homebuyers to withdraw as much as $50,000 for home finance.

According to the Super Members Council, unleashing such a policy would add $70,000 to the price of a house worth $780,000 today.

Of course, such estimates depend on assumptions that can be debated forever. But whatever the exact numbers, economically allowing the early release of super for home buying – in common with any other home grant assistance – will push prices higher.

Indeed the difference with tapping super is that users of any such scheme would be both pushing up prices and reducing the amount of super they could potentially accumulate. House prices are strong but unlikely to beat worldwide returns from investment markets compounded in a lifelong tax shelter.

However, with double standards at the big super funds and home affordability under exceptional strain, the subject is not going to go away.

Moreover, the success of the absurdly complex First Home Super Saver scheme proves beyond doubt the appetite among homebuyers for tapping super. The FHSS scheme allows you to make voluntary contributions before or after tax up to a certain amount – $15,000 a year or $50,000 in total towards purchasing a home.

Industry experts warn investors the scheme is so difficult that they should seek advice from an accountant before trying to use it. Nonetheless, 30,000 Australians have tunnelled through the paperwork to try and access their own super to help buy their own home.

The pressure to allow super to somehow be used to assist homebuyers continues to increase as the amount that must go towards super in annual salary continues to escalate.

At present the super guarantee charge is at 11 per cent and it is due to rise to 11.5 per cent on July 1 then move to 12 per cent on July 1, 2025.

Against this backdrop, every new idea for tapping super in home finance will justifiably get attention. The latest from Senator Andrew Bragg is to allow people to pay super into their mortgage offset accounts.

At the same time, think tanks such as the Grattan Institute are reviewing super. In a submission to the Senate economics committee, the group suggests the escalation of the SGC should stop right now.

The submission says: “Stopping the planned increases in the Super Guarantee would avoid forcing people to over-save for retirement (boosting their incomes while they are working), and would save the budget $1.2bn a year.”

It also says some savers should have the option of taking ‘cash out’ from their super.

Meanwhile, with the focus firmly on the demand for homes, the supply of homes is emerging as a significant problem.

As immigration levels lift substantially, total dwelling approvals this financial year are going to be lower than last year. There were about 10,000 less new homes approved in the July to November period 2023 than in 2022.