Saving for a house deposit is one of the toughest uphill battles facing Australia’s young people.
But in Tuesday’s Budget announcement, the Federal Government pledged to help rectify that by unveiling a new savings scheme.
From July 1, Australians saving for their first home can use their pre-tax income to make additional superannuation contributions of up to $15,000 per year, maxing out at a total of $30,000.
This money will be taxed at a discounted rate of 15 per cent. And it’ll sit pretty until it’s ready to be withdrawn for a house deposit.
According to government figures, somebody who has a salary of $70,000 and deposits $10,000 a year, will have an estimated $25,892 upon withdrawal after three years. This is about $6210 more than what could have been achieved through saving in a regular bank account.
The concept is a relatively simple one. And there has been broad public support of it. Because at least it’s something.
But there is one niggling question I can’t get out of my head.
So, what if I change my mind?
What happens if you decide, in the end, you don’t want to buy a house?
That’s the catch. Because the answer to that is: tough luck.
A Treasury spokesperson tells Mamamia that if you change your mind about how you want to spend your money, you won’t simply be able to withdraw it.
What you salary sacrifice under this scheme will essentially be treated like any other superannuation contribution: it’ll stay there until you retire. The law only allows for limited exceptions, such as terminal illness or severe financial hardship.
University of Melbourne researcher Dr Kate Shaw says this fails to take into account that in life, things can change. You might sign up to the scheme with the complete honest goal of buying your first home.
But down the track, you can find yourself in a situation where you desperately need to use your money for something else.
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What if you are hit by a family or medical emergency? Or need to move or travel overseas? Or you simply realise a renter’s lifestyle suits you better?
As it stands, the Federal Government will be intent on refusing you access to the money you so carefully funnelled away.
So you’d better be 110 per cent sure you want to spend your hard-earned cash on a house deposit. Because it’s either that, or you don’t touch those dollars for several decades.
But how will they monitor what people buy with their savings after the amount is withdrawn?
The huge tax breaks make this an attractive, aggressive savings strategy.
And according to Dr Shaw, the scheme may be ripe for abuse from people who have no intention of withdrawing the money to actually buy property.
“I think they’ve created a problem for themselves… It’s a policy on the run,” Dr Shaw tells Mamamia.
“If it works as it is supposed to, it is a fine way of encouraging saving. But it’s going to be very difficult to monitor how the money is used.”
So how exactly will people’s house deposit spending be tracked?
The short answer is that we don’t know yet.
A Treasury spokesperson says the Australian Tax Office will be tasked with determining a person’s eligibility before releasing their funds. But precisely how they will ensure each individual purchases their first home after withdrawing for their deposit remains to be seen.
“The Treasury will develop appropriate mechanisms with the ATO, which the government will consult on before legislating,” the spokesperson said.
Still, Dr Shaw's advice for young people is to take advantage of the scheme's tax discounts. It's a great saving opportunity. Just be prepared to only put away money you're completely comfortable risking never seeing again until retirement.
So while this initiative is indeed something to help aspiring home owners, it really feels like more of a savings scheme dressed up as a first home buyers measure.
And Dr Shaw thinks young Australians deserve better.
The Opposition leader, Bill Shorten, has already said he won't support the Turnbull Government's efforts to address housing affordability. In his budget reply speech on Thursday night, he renewed calls to scrap negative gearing - a move Dr Shaw is also calling for.
She stresses that the biggest issue with the Federal Government's policy is it does not help solve the problem of swelling property prices. In fact, it exacerbates it.
"We'll have a bunch of first home buyers who have more cash than they would have otherwise, but still competing with investors. They'll be putting more money into the market and house prices will just go up."
What do you think about the Federal Government's superannuation savings scheme to help housing affordability? Tell us in the comments below.