So the 2017 budget has been handed down and everyone in the SMSF community breathed a collective sigh of relief that the sort of superannuation pain witnessed the year before was not repeated.
In fact there were really only two significant announcements on the night affecting the retirement savings system. One was the introduction of the First Home Super Savers Scheme allowing individuals to sacrifice up to $30,000 of their salary into their superannuation fund for the purpose of funding the purchase of their initial place of residence.
The second was the measure to allow retirees who are downsizing to contribute a maximum of $300,000 from the proceeds of the sale into their super fund regardless of their current member balance.
As usual the government was very scant on detail regarding these two changes and on the surface both appear to have serious limitations.
Both initiatives are attempts to prove the government is taking action to address the housing affordability crisis for first home buyers in the country but will they really be able to do it?
First, what level of compounding returns will be needed on a base amount of $30,000 to amass an amount large enough to satisfy a deposit on a property? If the individual is looking at buying into the Sydney or Melbourne property markets they may reach an age where they satisfy a condition of release before the sum of money needed has been achieved. That’s even with the deemed return of 4.78 per cent return per annum.
Second, the downsizing exercise may help address housing affordability through increasing supply if the people involved move into an aged care facility or perhaps decide to rent a property and not own one for their remaining years.
In all likelihood they’d be looking at moving from perhaps a three or four-bedroom house into a smaller unit. If so that’s probably going to be the same type of property first home buyers will be looking to buy resulting in a worsening of the current situation by increasing demand. Supply is unlikely to be stimulated as first home buyers would not be able to afford a three or four-bedroom residence.
But regardless of how the situation might play out one thing cannot be refuted, and that is the government has once again done nothing to disguise the fact superannuation money will be used as a quick fix for some of the other economic woes facing Australians.
It’s amazing how silent Canberra has become on wanting to enshrine the objective of superannuation savings in law recently.
When this recommendation from the Financial System Inquiry (FSI) was brought down it was embraced with a good level of enthusiasm with further consultation wanted to get the definition right.
But the suggested purpose was for superannuation to either supplement or act as a substitute for the age pension. Many thought this might be a little bit too narrow but stretching it to now somehow have it fix the housing affordability crisis is nothing short of ridiculous.
One thing is clear though and that is, no matter which party is in power, the government’s intention is to continue to use retirement savings as a fiscal lever to solve any economic woes that are present.
So don’t dream this latest change will mean this incessant superannuation tinkering will now be over. Instead I think you can look forward to the same thing reoccurring for many years to come.
