A senior member of the Labor party has raised a number of concerns with the First Home Super Saver Scheme, which was announced in the 2017 Budget, calling it a “disastrous approach” which would undermine superannuation.
Senator Gallagher, the Labor Shadow Minister for Small Business and Financial Services, said in a speech that the First Home Super Saver Scheme (FHSSS) could lead to superannuation being used for purposes other that retirement.
“The introduction of this policy could be just the beginning of allowing other withdrawals from super – which we believe would be a disastrous approach which would severely undermine our superannuation system.”
Senator Gallagher said that the FHSSS policy is inconsistent with the objective of superannuation in the, as yet unlegislated, Superannuation (Objective) Bill 2016.
The Senator also said the policy could have “unintended impacts” on other super fund members, as the amount of income released, alongside the contributions, is a deemed amount.
“It is not clear what would happen in the event that the prescribed earnings rate for housing deposits differs from the earnings of the super fund. For example, if the housing deposit earnings rate is higher than what the super fund earns, will other members cross subsidise those who withdraw their super for housing? Or will the super fund need to draw from the member’s compulsory super savings?”
The policy could be “very difficult to implement,” Gallagher said, noting that the ATO will be responsible for determining eligibility, calculating the release amounts and for compliance.
“Frankly, we are yet to see the details about how the ATO will go about these various responsibilities.”
According to the Senator the policy may not help first home buyers – because house prices could increase faster than the benefit from the scheme – and “does nothing” to address housing affordability.
Labor Shadow Treasurer Chris Bowen has previously said that the party would oppose the introduction of the FHSSS.
Labor has yet to come to a position on the proposed measure to allow people who downsize their home to contribute extra to superannuation.
“Labor however is still consulting stakeholders and considering whether there are sufficient benefits to the housing market to justify granting further superannuation tax concessions to higher income earners,” said Senator Gallagher.
Note that, as of 1 July 2017, the First Homer Super Saver Scheme has not been legislated, and there are questions over if it will pass the Parliament when it is introduced.