In last week’s budget the government announced that first home buyers will be able to make voluntary contributions into their super funds via salary sacrifice from their employers, for the purposes of saving for a home deposit.
It certainly sounds like a step in the right direction in helping first home buyers save more than they ordinarily would. But upon pondering the practicalities, it raises a few questions:
Super funds are for the long term. Investments go up and down; some years your super will make a loss, and other years a gain, but over a period of 40 or 50 years they are designed to be profitable. Let’s assume that our first home buyers Mary and Peter are salary sacrificing an amount into super for 3 or 4 years, the perfect property becomes available and they need to withdraw their hard earned funds to put down the deposit. But there has been a downturn in the stock market and the money they have stashed away in Super is worth much less than they thought. What now????
Super funds are going to need to treat the voluntary contributions differently to the compulsory 9.5% to avoid disappointing Peter and Mary. Is this really workable in superfund land? After all, some people already do voluntary super contributions – for the purposes of saving for retirement and presumably these people want the long term, not the short term benefits from these investments. Are super funds going to be able to distinguish which contributions are which?
As experts in real estate*, we’re acutely aware that things can move very fast once an offer is accepted and there’s often a deadline to pay a deposit. Are super funds geared up to moving funds around quickly?
As the scheme is rolled out I guess we’ll see what happens…
*The views in this article are the ponderings from the team at Harcourts Kiama who know all about real estate, but are not experts in superannuation. For a clearer idea on how to save for your first home by salary sacrificing into super, please speak to your super provider.