Australians should be allowed to withdraw their entire superannuation balance to pay off their mortgage, a Liberal frontbencher says.
The Coalition went to the last election campaigning to allow young Aussies buying their first home to withdraw $50,000 from their retirement savings to fund a mortgage deposit.
Since Labor came to power in May 2022, the average borrower is paying $19,000 more on their mortgage every year, but those in arrears or even in default can’t immediately access their super under existing severe hardship rules.
With the cost-of-living crisis testing borrowers, the Opposition’s home ownership spokesman Andrew Bragg wants to allow Australians to withdraw all of their super to pay off their mortgage – hinting the Liberal Party could make it an election issue.
‘We’re looking at that – it’s not our policy yet,’ he told Daily Mail Australia.
Senator Bragg gave the example of a homeowner aged in their 40s with an average mortgage of about $600,000 being allowed to use $200,000 from super to offset the loan.
‘That would make a massive difference to your interest [being paid],’ he said.
‘So, you’re paying off more than principal and you’re getting closer to home ownership.
‘The key determinant of your success in retirement is not your superannuation balance, it’s your home ownership status.’
Australians should be allowed to raid their entire superannuation balance to pay off their mortgage, a Liberal frontbencher says (pictured is a Sydney auction)
A Senate economics committee is exploring the idea of allowing Australians early access to their super.
The ‘Improving consumer experiences, choice, and outcomes in Australia’s retirement system’ inquiry is due to release a report next month.
An interim report, released in May, recommended allowing Australians to set up a mortgage offset account linked to their super, so borrowers could service monthly repayments from their retirement savings instead of depleting their bank savings.
‘There are many Australians who have a decent-sized super balance that they would like to offset on their mortgage which would reduce their interest payments and get them closer to home ownership,’ Senator Bragg said.
‘There’s a range of ways this could be achieved from full withdrawal through to being held in a legislated offset account.
‘One of the things that worries me is you’ve got people forced to pay high fees to their super fund and simultaneously pay high interest to a bank.’
Existing severe hardship provision rules only allow Aussies early access to super if they are on Centrelink benefits, have lost their job or have a serious illness.
Senator Bragg, who chairs an economics committee, argued the existing early access rules were too rigid and meant Australians would only be able to buy a home with help from their parents.
‘It’s a highly rigid system. I just don’t buy this idea that we have to force everyone into a straitjacket,’ he said.
With the cost-of-living crisis testing borrowers, the Opposition’s home ownership spokesman Andrew Bragg wants to allow Australians to access all of their super to pay off their mortgage – hinting the Liberal Party could make that an election issue
‘If the Bank of Mum and Dad is now going to be determining housing outcomes, we’re in very dangerous territory.
‘Increasingly, we’re seeing housing outcomes dictated by parental wealth and that’s very bad, I’d say that’s very un-Australian.
‘Where super comes in, absent the Bank of Mum and Dad, this is likely to be people’s biggest source of capital.’
The previous Coalition government allowed Australians to access up to $20,000 from their super in two $10,000 instalments in the first and second half of 2020 as Covid lockdowns forced businesses to stop serving customers in person.
Labor is opposed to early super access, arguing this would deplete retirement savings and make the elderly more dependent on the age pension, which is available when most people turn 67.
Australians born since July 1964 can’t access their super until they turn 60.
The Reserve Bank’s 13 interest rate rises since May 2022 have caused monthly mortgage repayments to surge by 68 per cent, with the cash rate now at a 12-year high of 4.35 per cent.
This has seen the repayments on an average $600,000 mortgage climb from $2,306 to $3,868 per month, with annual repayments now $18,744 higher than they were a little more than two years ago.
But the average Australian has $164,126 in superannuation, tax office data showed.
Prime Minister Anthony Albanese’s Labor government last year legislated to tighten early access to super, arguing that building Australia’s $3.5trillion retirement savings sector was the way to preserve a dignified retirement
Prime Minister Anthony Albanese’s Labor government last year legislated to tighten early access to super, arguing that building Australia’s $3.5trillion retirement savings sector was the way to preserve a dignified retirement.
Treasurer Jim Chalmers in November said early access to super was bad for long-term retirement savings.
‘The last decade saw the former government raid the superannuation system for its own purposes with a devastating impact on the savings of millions of Australians,’ he said.
‘Legislating an objective of super will help prevent this happening again.’
But Senator Bragg argued Labor’s connection to union-dominated industry super funds was stopping the government from exploring early access to super.
‘Labor don’t care about the workers, what they care about is the donations they receive from unions and the super funds,’ he said.
Treasury’s Intergenerational report last year predicted that spending on the age pension and aged care would climb by 40 per cent by 2063.
‘The idea that super makes a massive difference to pension is false,’ Senator Bragg said.
Senator Bragg argued that helping struggling home borrowers now would also help reduce spending on Commonwealth rent assistance and address intergenerational inequality.
‘For younger people who want individual agency, this is a practical policy,’ he said.
‘It’s also a policy that helps protect the Budget over the longer term.’