Using super to buy property

[datto]

Thats the criminal courts! Supreme Court in Macquarie st.

oops, I'm only familiar with central local

 

[MIW]

Just read that the feds are thinking of allowing ( I think anyone?) to use their super to finance a property purchase.
In the past this could only be done for those with SMSF?

Now, in order to assist FHB segment and maybe others get into the market, an idea has surfaced to let them use their super to break into the market.

Just talk at this point, no decisions made yet.

Is this a good idea? I would have thought not. Allowing FHBs to deplete their super to get into the market will serve to only increase house prices, thereby making it tougher for other FHBs with not much super to get in.
Also, the real danger is that once super (largely protected asset) is depleted into property ( largely unprotected), that money can be gotten out and used for pretty much anything. e.g. If I use 50k from my super to finance a house purchase, I can then withdraw equity (assume 50k or whatever the bank will lend me) on my house and use it for whatever I wish (vacation, blackjack tables etc). This is then like taking money from super directly to finance other means. Surely, that's dangerous.
It could work provided that the money is used wisely, and equity is used only for wise purposes ( like securing other investments) but that is not always the case and can spell real danger if not careful- I think it takes an educated investor for this and a lot of FHB;s are just not ( no offense to any FHBs...)

You have the idea right but not the structure or the working... You would not be able to redraw it would be held by banks, not you personally. Also, currently cannot leverage further in SMSF so I presume this would not be relaxed.
My banker friends like it, I wonder why, but I agree with you, this would further inflate Sydney prices....
The funds would not be depleted, I heard a statistic somewhere that SMSF trillion $ could buy most of AUS residential property.
I have no idea wether it is good or bad, have not heard all the logistics right, I presume it's only for 1 property, FHB?
BUT....I suppose that's how they want to have more access to more money (wether govt. or banks)?

 

[Ed Barton]

The other interesting aspect of the article is that there is an alternative in Canada - a Tax-Free Savings Account where the account-holder can contribute up to $5,500 a year and income earned on contributions is not taxed. I guess something like that for first home buyers could be considered in Australia.

There used to be broadly similar scheme, at least in that it tried to encourage savings specifically for purchasing a first home - the scheme was abolished around a year ago. First home saver account.

Google if you want specifics, but it went something like:

• Govt contributed 17% of what you contributed up to a limit of ~$1k pa
• You needed to contribute for a minimum of 4 financial years. After that you could withdraw funds and buy first house.
• Interest on the account was taxed at a flat rate of 15% regardless of other income.
• Balance not counted for welfare like FTB
• There was a limit on how much you could have in the account. After that you couldn't contribute any more. Maybe something nearing $100k
• If the money was never spent on a house it would transfer to a super fund of yours.

If you were in a relationship both partners could have separate accounts and both attract the govt contribution and tax concessions.

The accounts were not popular.

 

[perthguy]

There used to be broadly similar scheme, at least in that it tried to encourage savings specifically for purchasing a first home - the scheme was abolished around a year ago. First home saver account.
...
The accounts were not popular.

Thanks Ed. It doesn't look very attractive to me. I'm not surprised they weren't popular. Maybe allowing FHBs to salary sacrifice into a super like product for a deposit would be more attractive? If they didn't use it for a house, it could be rolled over into super. Contribution caps would have to apply of course.