With affordability already low and a decreasing housing supply, Prime Minister Scott Morrison has announced a proposal called the Super Home Buyer Scheme. It would allow first-home buyers to tap into their superannuation fund for a deposit on a home if the Coalition government is re-elected.

What Is The Super Home Buyer Scheme?

Under the Coalition’s plan, first-home buyers would be able to withdraw up to 40% of their super, to a limit of $50,000, to put towards a deposit on a home. The following conditions apply:

• Home buyers must contribute 5% of the home value to the deposit from their own genuine savings.
• Participants must live in the home for at least a year.
• The money withdrawn from the super fund must be returned, along with any proportional capital gains, when the property is sold. This is designed to protect participants’ retirement savings. Any capital gains from the home repaid back into super would not be taxed.
• There is no minimum super balance to be eligible but the amount you can withdraw for the scheme is capped at 40% of your balance.
• There is no income cap.
• Homes of any price are eligible for the scheme.
• Participants can use the plan in conjunction with the Home Guarantee Scheme or First Home Super Saver Scheme.
• Both members of a couple can access the scheme and if one partner is ineligible, the other partner can still participate individually.
• Interested parties would have to apply through the Australian Taxation Office, which would run the scheme.

Who Can Access It?

Only first-home buyers can participate in this scheme. The buyer must have a 5% deposit saved for the home without accessing super. There is no cap on income and no minimum super balance required. Only owner-occupier loans are eligible and the buyer must live in the property for at least 12 months.

How Will This Affect First-Home Buyers?

Access to super would potentially allow first-home buyers to purchase a home sooner with a substantial deposit. However, aspects of the scheme have already been questioned. To withdraw $50,000, the buyer must have $125,000 in their superannuation fund, an amount most Australians don’t have until they are in their 40s. Thus, the amount most buyers in their late 20s and 30s could borrow would be significantly lower, potentially making it harder for younger buyers to participate. Opponents of the plan have also expressed concerns that it will drive up home prices. Proponents have conceded this but added that the aid to first-home buyers would outweigh that drawback.

What Happens When You Sell The Property?

The scheme has a provision designed to protect people’s retirement savings. When the property is sold, the amount withdrawn from the fund has to be returned, along with any proportional capital gained. For example, if you accessed $50,000 and your property had doubled in value when you sold it, then you must return $100,000 to your super fund. If the price of the house falls, then your repayment also decreases proportionately. So if you borrowed $50,000 for a $500,000 home and the property sold for just $450,000, you would return $45,000 to your super fund. Taxes are not paid on any capital gains required to be paid back into super under the scheme.

Downsizing Benefits For Older Australians

Limited supply is one of the main causes of the home affordability crisis. Morrison has announced a plan designed to address this issue as well. If the Coalition wins the election, the age threshold for superannuation contributions from property sales will decrease from 65 to 55 from 1 July 2022. This means people aged 55 or older would be able to put up to $300,000 (up to $600,000 for a couple) into their super from the sale of their home without tax penalty. To encourage more pensioners to sell their homes, proceeds of the sale would be exempt from the aged pension asset test for two years instead of just one. The proposal is designed to free up large homes for younger families.

Labor’s Help To Buy vs Super Home Buyer Scheme

Labor previously announced its Help To Buy proposal, a shared ownership scheme under which Australians with a taxable income of up to $90,000 for individuals and $120,000 for couples are eligible to have the federal government pay for up to 40% of the purchase price of a new home, and up to 30% of an existing home. The main differences between the two schemes are:

• Help To Buy requires a saved deposit of 2% while Super Home Buyer Scheme requires a 5% saved deposit.
• Under the Help To Buy scheme, the government owns an equity stake in the home proportional to the amount it contributed to the purchase, although homeowners can buy out the government’s stake over the term of the home loan. Under the Super Home Buyer Scheme, the home buyer owns 100% of the property but capital gains made on sale are to be returned to super proportionally. In that sense, it is like an investment in your super.
• Help To Buy would be available to 10,000 eligible participants each year, the Super Home Buyer Scheme does not have any limit on participants.
• Help To Buy would come into effect on 1 July 2022 if the Labor Party wins the election. The Super Home Buyer Scheme would come into effect no later than 1 July 2023 if the Coalition wins the election.

Learn more about Help To Buy here.

Home Loan Experts’ Opinion

Home Loan Experts founder Otto Dargan made the following observation about the Super Home Buyer Scheme: “The proposal addresses the issue of saving a deposit and helps lower-income Australians by introducing no income caps and no price caps. It means the super fund is effectively investing in the home. The major blind spot of this policy is that it does not address the housing supply sufficiently. Overall, the plan is a good idea.”

Want to know more about the Super Home Buyer Scheme or find out if you’re eligible? Contact our specialist mortgage brokers at 1300 889 743 or fill in our online assessment form. We can help you find the home buyer schemes that can help you, today!