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ScoMo’s ‘wrong message’ on retirement saving

by Matthew Smith | 17 May 2017

Letting first home buyers tap their voluntary super contributions won’t amount to “siphoning”, but it will be sending the wrong message to savers, says John Piggott, University of New South Wales’s Scientia professor of economics. #3 ScoMo’s ‘wrong message’ on retirement saving 

As part of Federal Budget, Treasurer Scott Morrison announced that voluntary contributions for super of $15,000 per year up to a total of $30,000 per person would be available to be used to buy a home.

Under the plan, money withdrawn from concessional contributions would be taxed at marginal personal rates with a 30 per cent tax offset.

However, putting all the headline numbers aside, the total contribution on the sticker price for a first home would be minimal, Piggott says, during a panel discussion in the last week hosted by the University of New South Wales on the budget outcomes.

“I don’t think it will make much difference either way in terms of the affordability of housing for young buyers,” Piggott says.

“I am concerned that the purpose of super is getting diluted,” Piggott tells an audience of policymakers and professionals.

Piggott points to the language of the Financial System Inquiry, known as the “Murray Inquiry”, which outlines the purpose of superannuation be “enshrined” in legislation.

“This was to try to prevent or to dampen down the use of what we have as an enormous value of funds under management for super, to make sure that’s not going to be siphoned off for other purposes,” Piggott explains.

Piggott is joined by UNSW economics professor Richard Holden; Centre for Social Impact CEO, Kristy Muir; and lecturer for UNSW’s school of taxation and business law, Kathrin Bain, for a budget discussion which can be watched here.

“What’s being proposed here doesn’t amount to a siphoning off, but it does confuse the issue, because it means going into a super account taxed under super rules,” Piggott points out.

“So there is a question whether that clarity of purpose is being compromised by this provision, and I think that will have long-term consequences if that does play out,” he says.

Australia’s approximately $1.6 trillion is the largest and easily the most coveted pool of money and invariably it becomes the target of politicians looking to appease voters at budget time.

Every year industry implores government to not tinker with super and this year seems no different.

Also contained within the budget is the provision for people aged 65 or older to make non-concessional contributions to super up to $300,000 each from the proceeds of the sale of a family home.

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