A prominent financial advisory firm is backing the Federal Government's First Home Super Saver Scheme even though it has received backlash from superannuation industry bodies.
Dixon Advisory believes the latest draft legislation proposes more flexibility than an earlier version of the scheme and is calling for bipartisan support in parliament - regardless that it does not appear to be on the immediate legislative agenda.
The advisory firm argues that moving on the proposed legislation would give certainty to first home buyers about whether the scheme will be available for use in 2017.
Dixon Advisory head of advice Nerida Cole said as property prices on the east coast remain high, first home buyers continue to face immense affordability challenges.
"Certainty about how to access support is important to help buyers plan out their finances for the year ahead," Cole said.
The proposed First Home Super Saver Scheme offers tax concessions for first home buyers to help them get to their savings target more quickly.
Cole said the draft legislation clarifies that first home buyers purchasing a home with a partner who has already owned a home, will not be excluded from using the scheme.
Other key features include:
- No time limit on the saver account
- Individuals can start saving up to $15,000 per annum from 1 July 2017, up to an overall maximum of $30,000
- No need to open a separate account
- First withdrawals are accessible from 1 July 2018
She notes for an average wage earner - if they are able to maximise the $30,000 limit over a two-year period they will have approximately $5000 more in their pocket to help with the home deposit - compared to saving in their personal name.
"These extra tax concessions alone won't be enough to fund a home deposit, but it can help shave time off how long it takes to save a deposit," Cole said.
"Having a good financial situation in retirement involves much more than just what your super balance is - not owning a home in retirement creates enormous financial stress and instability."
Industry Super Australia is doubtful of the scheme and said it will put retirement savings at risk and possibly drive up housing demand.
Submissions to Treasury closed on Friday (4 August) and ISA argued that in guaranteeing returns through the use of the shortfall interest charge, the FHSSS would eat into compulsory superannuation savings.
ISA chief economist Stephen Anthony said: "Super funds will be forced to dip into compulsory savings to cover shortfalls in 'guaranteed' returns, leaving people with much less at retirement."
"People must also understand that after paying super contributions and earnings tax, the $30,000 put into the scheme could be worth as little as $25,000 on withdrawal," he said.
Anthony added the FHSSS - for what is only a marginal tax benefit - was likely to drive up housing demand, leaving first home buyers with increased household debt or locked out of the market.
"Policy makers can target supply and demand in our major cities by reigning in investor tax concessions and boosting housing stock," he said.