Super: an answer to affordability? - By David Naylor – Co-founder, Chan & Naylor Property Accounting & Wealth Advisory Group
It’s no secret there’s a housing affordability crisis here in Australia, particularly for the younger generation – just how can they raise the 25% required (for deposit and stamp duty costs) to buy their first home?
There has been a lot of debate about this, but not many have offered a practical approach to solve this problem. I think, allowing first home buyers regulated access to their superannuation, could be the way forward.
Here are practical proposals on how superannuation could assist first home buyers:
1. Allow first home buyers access to their superannuation balance by way of loans to use as deposit on their first property purchase:
The first home buyer could access the funds by way of a 10-year fixed interest only loan from their superannuation funds. The newly created “first home deposit reserve account” assists with the initial deposit of 25% to acquire their first home. The interest rate on this loan from the superfund would be calculated at the then current market fixed rate and the interest on this loan capitalised. It will be only payable at the end of the loan period in 10 years.
2. Incentivise young people to save for their deposit:
Allow tax-free status for employee contributions into a newly formed “first home buyers deposit reserve” within their super fund for first 10 years of employment and capped at $5,000 p.a., therefore maximum $50,000.
3. Allow first home buyer access to employer contributions for the first 5 years of the loan period:
By doing so, it will assist the first home buyer with their monthly mortgage payments. This amount would also be paid back to the superannuation fund at the end of the loan period.
4. All loans are repaid in full with interest to the superannuation fund after 10 years
Managing the commercial loan agreements and the registration of these documents between the super funds and the first home buyer is one area that would require strict oversight. The Government will have to work closely with the banks to protect guarantees and the principle loans made by the super funds to ensure that the property cannot be transacted or offered for other security without formal release letters from the government and or the superannuation fund. This will protect the principle loan to the member to ensure the asset is protected and monies are paid back to the superfund in ten years’ time.
Visit LJH.chan-naylor.com.au to get in touch with a Chan & Naylor Property Specialist Accountant in NSW, QLD, VIC and WA