The Financial Planning Association of Australia (FPA) has welcomed the attempt by the federal government to address housing affordability under its proposed Super Home Buyer Scheme, but has questioned how it will interact with superannuation.
FPA chief executive Sarah Abood said “the coalition’s proposal is interesting”, but was concerned about the operational aspects of allowing superannuation to be used for home purchases.
“Under this proposal, a share of the member’s first principal place of residence could be considered to be an asset of their superannuation fund, like any other investment such as shares or bonds (although of course the personal usage rule would need to be waived for this kind of asset),” Abood said.
“From the super fund’s perspective, the asset would be illiquid and no income is generated while the fund holds a share of the home. On the other hand, the member might be saving some rent or mortgage interest, and we presume that any capital gain would be tax free to the fund, another potential positive.
“The super fund would need to track the value of the home while it’s held so it can report to members the real value of their super.”
She suggested a mechanism would be required to calculate the share of capital gain once the house has been sold, including the impact of home improvements, to ensure the gain and original principal were returned to the fund.
The FPA was also concerned about the absence of advice in the proposal and the potential problems this could raise, she said.
“Direct property is not a regulated financial product and anyone can advise on this type of asset. If someone is getting their advice from a property developer or credit provider, the person’s full financial situation might not be taken into account,” she said.
“There is a risk that someone might end up ‘stranded’ in a property they can’t afford to sell: because after returning the original investment plus gain to the fund, they might not be able to afford to buy another home without that support.
“The coalition’s proposal is interesting and certainly addresses a critical issue for many Australians. We are keen to understand more about how it might be implemented – because it’s important that this stacks up as a potentially good investment for someone’s super fund in its own right.”