Should Australians Be Allowed to Use Their Super to Pay the Mortgage? Analysts Weigh In

The conservative-leaning One Nation earlier this week released its plan to allow Australians to divert 3 percent of their superannuation contributions into their take-home pay to help cover mortgage or rent payments.

That 3 percent will also be taxed at the lower 15 percent superannuation tax rate—normally reserved for super funds to encourage retirement savings—and will last for three years.

For Australian workers, 12 percent of their wages or salary are diverted into a nominated super fund to be accessed upon retirement.

According to One Nation’s modelling, a person on an annual income of around $90,000 (US$64,400) could pocket an extra $40 per week in take-home pay under their policy.

“An average worker could put $44 a week towards their mortgage and save more than $33,000 in interest over the life of the loan,” One Nation leader Pauline Hanson said on social media.

The move has been opposed by Labor and met by doubt from the Coalition.

“We don’t support weakening of a system that is there to ensure that people are able to live a dignified retirement and not be dependent on the age pension, and it is a long-term investment,” said Labor Finance Minister Katy Gallagher.

Move Amounts to Tax Cut for Australians

Independent economist Saul Eslake said the policy would reduce super balances across the board and could drive up demand for the age pension—and pressure on taxpayers—in future.

“Perhaps also worth noting that although superannuation is ‘your money,’ it is taxed much more lightly than ‘your money’ when it comes from wages and salaries or in other forms,” Eslake told The Epoch Times.

“One Nation’s policy preserves that preferential tax treatment, but without requiring you to defer using that money until you reach retirement. So it in effect amounts to a tax cut for two-thirds of people who have mortgages or who are renting.”

Concern About Inflation

However, Eslake warned the move could trigger a rise in inflation.

“That’s because this policy would be putting a fairly significant amount of money into the bank accounts of quite a lot of people—roughly one third of all Australians have a mortgage, and another roughly one-third rent)—which in turn, they would likely spend,” he said.

The economist said this would, in turn, boost “aggregate demand,” or spending by households and businesses.

“[This is] contrary to what the Reserve Bank of Australia is trying to do, which is to bring aggregate demand into line with aggregate supply in order to reduce upward pressure on prices (i.e. inflation).”

“So, people with mortgages would probably end up being no better off, and potentially worse off—depending on the size of their mortgage. People renting might be better off since increases in interest rates don’t directly affect them.”

However, Eslake prefaced this by saying the next election was not due until May 2028, which means there’s enough time for inflation to drop within the target 2-3 percent range.

In the Long Run Will Help Young Aussies: Accountant

Finance expert and accountant Shane Shmuel said the move could help young Australians with entering the property market.

“I like that as long as it’s not used as a route to pull out super and avoid investing for the future,” he told The Epoch Times.

“In the long run it will help young people get into to the property market which will help them in the long run and benefit them later in life.”

Mortgage Payments More Pressing Than Super: Young

Graham Young, executive director of the Australian Institute for Progress, said lowering super balances was not as pressing as keeping up with mortgage repayments.

“Even in the current market owning your own house is a better investment than any form of superannuation, partly because of its preferential tax treatment with no capital gains tax, and partly because there is nothing more basic than shelter,” he told The Epoch Times.

“And if they are forced into the rental market they will need to pay rent out of taxed income.”

He said One Nation had identified a “real problem” and that was compulsory super payments deprived families of income when they need it most.

Why Not Lower the Current Super Rate?

Yet Young argued the policy was too complex a solution, and suggested looking at at lowering the compulsory super rate from its current 12 percent, meaning the three percent just gets paid straight to workers.

“The government’s own Retirement Income Review examined that question and came to the conclusion that, because of interaction with the pension system there was little difference [or benefit] to the retiree [who pays] between 9.5 percent and 12 percent [into their super],” he said.