Use 40% of super to buy home

Vote 1 for @Sackie.

The easiest choice. *Everyone wins.









*everyone on my list

 

Today, one can retire, withdraw all/most of one’s super and spent it all on a new car, an overseas holiday, a great night at the casino, …

This is not a new phenomenon - I started work 45 years in 1977 in the superannuation area. It was happening then and it still happens today.

For years, governments have tried to legislate against stupidity. They can as constituents are so sulks, they work out how to circumvent the legislation.

 

Are you running as an Independent? Under the Property First party platform?

 

I agree that's it's a good plan - but - unless there is a alongside plan to increase supply of housing, all it will do is drive prices of existing stock up ... perhaps it should be restricted to new homes/new builds

 

LOL. Golf is sucking up my money...

 

Im torn on this

On the one hand its your own money. You should be able to do with it, as you like. And its "responsible" to buy your own house, so why not? + when you sell it, the money + cap gains needs to go back to your super..

On the other hand.. you are enticing people to use money set aside for retirement savings.

In many other countries, such as the UK, "super" (or pension as its called), is opt out. namely you can tell your employer to pay you directly instead of your pension fund.. so you can spend your money how you like...

 

Many on the interweb haven't lived/eeked out a living through a recession (I play all the 80's punk songs & UB40 just to remind me how good times were under Maggie Thatcher etc)

That is my biggest beef with the system, blow it all on day 1 of retirement (don't give any away) & Centrelink to the rescue.

It's not like they won't have an appreciating asset or a roof over their head. It's quite a smart move as the house isn't considered for the assets test, yet super is and can reduce the pension received.

It's the Super industry who are deprived of the contributions, mortgage insurers and the banks who will be lending smaller amounts to FHB who will be missing out but have kept out of the discussion (like it's a bad thing).

 

Hospitality worker to use 40% of super to move into first car

 

If you adopt that attitude then you should hand back the tax concessions and pay marginal tax on that income when you earn it.

 

Its sort of your own money.
It's money your employer has paid into a favorable tax vehicle on the condition that you won't access it until retirement.
So yes, it's money in your name, but its not your money to use as you please during accumulation phase however.

As to why not? Well if you need to use super to buy a house then you most likley can't afford said house, and you probably don't have the means or smarts to be self sufficient in retirement - which is the aim of compulsory super in the first place.

The real problem is housing affordability, and being able to pull super funds does not address this issue.

 

Totals agree. It is not legally "your" money until you reach retirement age.

 

It's in a trust and you're just one of many beneficiaries (fund members).

 

So people work 40hrs a week, and the earnings are "not their money".
They pay over 46% tax, and the ramainder is still not their money.
No wonder people will stay poor.

Or use for a deposit on an IP and get tax benefits.
Or a 50% margin loan amd claim interest.

 

See How super works - Moneysmart.gov.au


Your super is your money. Look after it by:

• choosing an account with lower fees
• comparing your fund's performance with others
• combining accounts if you have more than one
• checking your insurance before you change funds
• knowing what’s involved before deciding whether to choose an SMSF
• being wary of anyone offering to withdraw your super early

 

Some useful calculations in Noel Whittakers latest newsletter -> obviously a number of assumptions but seems reasonable.
From - Noel News 18 May 2022 | Noel Whittaker
=======================================================
The assumptions I used are that the home costs $550,000, the purchasers are a couple both working, and both have $80,000 in super which I think could be on the high side. Stamp duty varies from state to state and you can do your own calculations on Google. I have used Queensland numbers.

Where Stamp duty is zero up to $500,000 or first home buyers – the trouble for them is finding a house at that price. Notice that stamp duty and mortgage insurance take $16,000 out of their deposit. I have used a 5% deposit which rounds up to $28,000. If they both draw 40% of the superannuation as a house deposit, they would have $64,000. Add this to their available deposit of $28,000 and they have $92,000 available. It’s a good sum to start off with and does enable mortgage insurance to be drastically reduced.

When mortgage insurance of $5000 is factored in, they need a loan of $474,000. Repayments of 4% per annum would be $2,263 a month (or $520 a week) over 30 years.

First home buyers normally live in a house for around eight years. If we assume the house increases by 4% per annum it should be worth $750,000 in eight years, by which time the debt should be down to $400,000. When they sell then they must repay the amount they withdrew from the super adjusted for the capital gain on the home. The $32,000 each they took from their super becomes $44,000 each if we use a rate of 4% per annum to match the house increase.

If they sell the house for $750,000, and repay the loan plus the amount back to their super, they should have $380,000 over. That means their initial stake of $28,000, which was their deposit, has grown to $380,000 over eight years.

The numbers work well because they are receiving 4% per annum in capital gain on the house, and the debt is reducing because the repayments are going to reduce it instead of paying rent.

True, the $64,000 deposit they withdrew from super would be worth $118,000 after eight years if their superannuation does 8% per annum. This means the superannuation is $54,000 less than they would have if the deposit was kept in super instead of being borrowed from it. But they are still miles better off.
=============================================================

My view is if it helps a FHB purchase a house instead of paying rent then they have to be in front. And they should have opportunities to top up their super over time. Yes it likely would lead to more competition in this market and push prices up.
It might slow down rental competition and rental increases which could encourage more investors to sell their properties as all the other costs continue to increase.

 

Thier earnings are thier money, they can do what they like with it.

The super contributions into a tax friendly vehicle are made by the employer for the benefit of employee in retirement so he/she is not a drag on the taxpayer later in life.

In that regard, its sort of thier money, aka its thier money in name but not in practicality (yet).

 

You forgot the 2% Medicare Levy.

45% only applies to the amount that someone earns over $180,000 not to every dollar earned. At that point, you're only paying an MRT of 29%, learn how the tax system works.

Contributions to super are concessionaly taxed at 15%, which is still substantially less than the MRT of 29%.

 

It's either a yes or a no answer.

It may be a "sort of" if the employer has the right to take back what they contributed. Can they?
Can the employers take back their share of contributions when a person retires and is able to draw down super?

Can you show me where the legislation says it's sort of their money in name but not in practicality? I wish to know because I may be able to claw back what I contributed to my employees.

 

Sort of - as in it's held in trust for a future date when you will be the beneficiary. However, as the future beneficiary, you do have quite a lot of control over the investment means of that monies held in that trust

 

The employer isn't a member of the fund,how would you propose to access your employee's fund's?

This would also apply to salary sacrifice or co-contributions (eg matched to salary sacrifice by the employee).

The amount under the SGC was established as an amount of the employee wages in lieu of a pay rise. So it's not the employer's money.