The Federal Government’s First Home Super Saver Scheme (FHSSS) is not consistent with the Superannuation Industry (Supervision) Act (SIS Act) sole purpose test, according to the Australian Institute of Superannuation Trustees (AIST).
In its submission to the Treasury dealing with the FHSSS Budget measure, the AIST said it had a number of “significant reservations” about the measure, not least of which being breaching the sole purpose test.
“The sole purpose test generally requires that superannuation funds be required to maintain benefits for members’ retirement, or for insurance related purposes,” it said. “The FHSSS is not consistent with this objective, nor is it consistent with the Bill (currently before Parliament) which proposes to enshrine an objective of superannuation. The objective will see super’s purpose explicitly stated to provide income in retirement.”
“The use of a superannuation fund for a deposit on a first home does not satisfy either of these. The FHSSS will see superannuation funds needing to change their operations to accommodate money that is not intended to be used in retirement,” the submission said.
It said the issues around accommodating such monies were many, and appeared to provide a far more complex solution for first home savers than methods employed previously, most notably the First Home Saver Accounts scheme.
“AIST has supported a version of the objective which ensures adequacy in relation to the retirement income. We believe that given the possibility that in periods of low returns, amounts from mandated contributions will be available as First Home Super Saver amounts, this could also reduce retirement incomes for Australians,” the submission said.
“We also note that there appears to be little discussion of equity issues related to this measure. In particular, we note that members drawing money out for a home loan are taxed far more leniently than an equivalent member taking a financial hardship amount.”
“Finally, we consider that that the impact on housing affordability or administration issues associated with this measure does not appear to have been subject to a cost-benefit analysis,” the submission said.