Revealed: Dipping into super to buy a home comes with a secret $1.4bn bill

Dipping into super to buy a home is tempting. But experts have now revealed how the scheme comes with a shock $1.4bn hidden cost.

Australian taxpayers will pay $1.4bn more every year by 2050 for the aged pension if first-home buyers are able to withdraw money from their superfund for a deposit, exclusive analysis has revealed.

The independent Parliamentary Budget Office crunched the numbers for a scenario where an individual aged 40 withdrew $50,000 from their superannuation fund in the next financial year and retired at the age of 67.

The PBO estimates Australian taxpayers would spend an additional $1.4bn on the pension based on those assumptions because Australians would have less in their super fund and be forced to rely on the aged pension.

The analysis is based on a person withdrawing $50,000 from their super. Picture: Andrew Henshaw

Ahead of the federal election, due no later than May 17, the Coalition has announced a super-for-housing policy where first-home buyers can withdraw up to $50,000 form their super fund to buy a home.

Labor MP and chair of parliament’s standing committee on economics Daniel Mulino said relying on super for housing will cost “first home buyers more in the short term and taxpayers more in the long term”.

“Peter Dutton’s reckless plan to force first home buyers to raid their super will push house prices up by even more than the $50,000 super withdrawal he is proposing,” he said.

Dr Daniel Mulino. Picture David Clark

“And now we have learned from the Parliamentary Budget Office that if people withdraw money from their superannuation, all taxpayers would be footing the bill with the cost of the Age Pension to grow.

“The real solution is to build more homes and help first home buyers without forcing them to rob from tomorrow to pay for today.”

In their analysis, the PBO worked off assumptions that a participants superannuation balance would be permanently reduced by withdrawals under the scheme and they will not make additional future contributions to compensate for the money taken out.

The policy will cost $1.4bn a year in the aged pension costs by 2050. Picture: Supplied

It also assumes that before retirement, superannuation returns would be 7.5 per cent per year.

Peak body Super Members Council chief executive Misha Schubert said the PBO was working off “conservative assumptions” with the true bill to be even bigger.

“We all desperately want more Australians to own their own home, but this idea won’t achieve that. It’s unfair to lump the next generations of Australians with a policy that would only make the housing affordability crisis worse by driving up house prices.”

The analysis comes after a report from the University of South Australia — which was commissioned by the Super Members Council — found that house prices would increase by up to 7 to 10 per cent.

The coalition’s housing spokesman Michael Sukkar previously rubbished the South Australian report as “junk”.

Originally published as Revealed: Dipping into super to buy a home comes with a secret $1.4bn bill