Like for many Australians, Kerrie Dare's home is her world.
"It's quiet, it's peaceful, it has my garden, it has my piano, it has my dog," she said.
But while the 45-year-old feels lucky to have bought a home, her circumstances have changed and she is now living in poverty and drawing on her superannuation to help cover her mortgage repayments.
She is frightened about what the future holds when her interest rate rises mid year.
"I live in heightened stress every single day," she said.
Ms Dare spent 25 years working as a florist and bought her two-bedroom house in Hobart's northern suburbs five years ago.
But a back injury and 14 bouts of shingles over her lifetime have left her in pain and unable to work.
She now relies on the disability pension for income.
"There are days when I need to ring my father to get help getting out of bed," she said.
"Sometimes a cool wind on my back can feel like knives."
Ms Dare has been able to access $10,000 a year from her superannuation to pay her mortgage.
But her fixed-rate loan expires in July.
"My mortgage repayments are likely to about double, which will mean that 80 per cent of my income will need to go on my mortgage," she said.
While Ms Dare is fearful about whether she will be able to continue to manage her mortgage, she said renting was not an affordable alternative.
The vacancy rate in Hobart is less than 1 per cent and it has been one of the least affordable capital cities to rent in Australia since 2019.
"I have multiple friends who can't find rentals, who are in sheds and in caravans with children," she said.
She said she will keep drawing on her super as long as she can in order to hold onto her home.
"I was always taught that superannuation was a bit of a holy grail," she said.
"Now it is far more sensible for me to use it while I am looking down the barrel of homelessness."
How to use your super on your mortgage
Not everyone can access their superannuation early to pay a mortgage.
The rules to access it are:
- You are suffering severe financial hardship
- On compassionate grounds (including making a home loan payment so you don't lose your home)
- You have a terminal illness
- You have a temporary or permanent incapacity to work
The Australian Tax Office released more than $570 million in superannuation for compassionate reasons last financial year.
Compassionate release of superannuation applications per financial year:
Financial year |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
|---|---|---|---|---|
Applications received |
53,700 |
59,900 |
45,200 |
56,300 |
Applications approved |
31,100 |
33,700 |
29,400 |
34,300 |
Individuals approved |
26,900 |
30,000 |
27,200 |
32,200 |
Amount approved |
$456.6m |
$523.2m |
$472.4m |
$573.1m |
People should be able to cash out excess super, expert says
Brendan Coates from the Grattan Institute predicts accessing super early is likely to be a much bigger issue going forward as people struggle to meet their mortgage repayments.
"We expect rates of financial stress to really spike as people roll off fixed-rate loans," he said.
"The 7 per cent mortgage rates today — what we'll get when the cash rate hits 4 per cent — are the equivalent of the 17 per cent plus mortgage rates that borrowers were paying in the early 1990s."
Mr Coates thinks there is a good case for allowing greater access to superannuation before retirement.
"With compulsory super now rising to 12 per cent of wages, people are saving much more for retirement than they need," he said.
"The typical retiree will have a higher living standard in retirement than what they enjoyed while working."
He said he would support people being able to cash out of their superannuation, each year, any contributions above 10 per cent of their wages.
"This would give people a financial buffer to draw on each year, including to help manage their mortgage repayments, or to pay the rent."
Using super for mortgage a no-brainer with 'no risk'
Property economist Cameron Murray takes the argument for accessing super early one step further.
"I've proposed we unwind Australia's superannuation system," he said.
Mr Murray said accessing super to pay a mortgage is a no-brainer that had "no risk."
"You're swapping ownership of one set of assets, for example BHP shares or government bonds, for another asset, which is the house you live in," he said.
"From a balance sheet perspective, it's not really changing.
"We know in retirement owning your own home is the best asset to have because it allows you to get the pension more easily," he said.
Mr Murray believes the superannuation system is flawed.
"It makes you poorer when you are young and poor, and richer when you are old and rich," he said.
A Productivity Commission Report in 2019 found Australians spend more than $30 billion in superannuation fees every year.
It is estimated superannuation tax concessions will cost the Australian government $52.5 billion this financial year, according to the Australia Institute.
"We could pay twice the age pension with the same budgetary effect because the tax breaks for super are so large," Mr Murray said.
The federal government has announced plans to reign in tax breaks for people with over $3 million in super.
At the moment, earnings from superannuation are taxed at up to 15 per cent — that will increase to 30 per cent for around 80,000 Australians, on the portion of their balance that is over $3 million.
There will be no change for Australians with superannuation balances of less than $3 million.
Reforms needed but early access to super not advised
The federal government has indicated it is opposed to making early access to superannuation easier.
The director of Super Consumers Australia, Xavier O'Halloran, agrees.
"It's really set up to be a last resort for people who couldn't find any other way to fund a medical treatment or to keep a roof over their head," he said.
"People need to be aware there are tax implications for taking your super out early and it's worth checking with the ATO to find out what they might mean for you."
He also said Australians should be aware of scammers encouraging early super withdrawals "that aren't allowed under the law, that's illegal and it can also lead to you having your retirement savings ripped off, which is a terrible outcome for people."
Mr O'Halloran said the cost of withdrawing super early increased over a lifetime.
"Someone in their 30s taking out $20,000; by the time they hit retirement age that would be worth about $50,000 — so you can see from the compounding interest you're more than double worse off."
Mr O'Halloran said while there was plenty of room for improvement, superannuation was still the best way to retire comfortably.
"Otherwise, the situation is full age pension, which is going to keep you just above the poverty line if you are a home owner but it doesn't do much more than that," he said.
More information about accessing superannuation can be found on the ATO website.
