Good news for super and first home buyers

The rules of super have been tweaked yet again. But this time it’s definitely a change for the better with the announcement that employer super contributions will need to be paid at the same time as wages.

It’s a fair bet plenty of workers don’t realise that as things currently stand, their boss can choose to pay compulsory super contributions quarterly. This can see your super money sitting in your employer’s bank account for up to three months each quarter instead of being invested in your fund.

Over time, the lost returns from this lag can really add up as fund members miss out on the benefit of compounding.

That’s not the only issue. Faced with a mounting quarterly super bill, some employers simply don’t pay up. Industry super Australia says on average, $4.7 billion worth of employer contributions is unpaid each year.

It’s hoped the more frequent payment of employer super contributions will help to resolve this problem, or at least make it easier for workers to identify non-payment at an early stage. 

The only downside is that the new requirement doesn’t kick in until July 2026. That’s more than two years away. So in the meantime the onus is still on employees to keep checking their super account regularly to be sure the boss is making good with their super guarantee obligations.

In other news, Julie Collins, Minister for Housing, announced changes to the First Home Guarantee and the Regional First Home Buyer Guarantee, which will allow friends and siblings to buy a home with just 5% deposit and no lenders mortgage insurance.

The definition of “couple” that applies to both schemes is being broadened. From July 1,  “any two eligible individuals” can be eligible to apply for these low deposit schemes rather than just married or de facto couples.

This opens the possibility for siblings and mates to pool their resources, potentially giving them a better shot at getting into the property market.

It has to be said though that buying a home with a friend, sister or cousin can test the relationship. Once the excitement of moving into a place of your own wears off, issues can arise over who maintains the place and how bills will be shared. There’s also the question of what happens in the future if your co-owner decides they want out while you want to hold onto the property.

That’s why it’s not a bad idea to have a formal co-buying agreement drawn up that addresses these issues and other possibilities. You don’t want to find yourself as a proud home owner only for the property to become a source of drama with a close relative or friend.

Back to the latest Reserve Bank rate hike which will put yet more pressure on households with a mortgage.  There is no easy solution but if you haven’t already done so, it makes good sense to take a look around and see if you could save by refinancing to a new loan or lender.

The mortgage market is still very competitive, and lenders continue to give their best rates to new customers. Shaving even 0.25% off your loan rate can be the equivalent of winding back at least one rate hike.

If you are planning to refinance, it’s worth talking to your mortgage broker or lender about the term you’re looking for in a new loan. The default term is typically 25 years – even 30 years. That’s not so good if you’re, say, 10 years into your current loan. Yes, signing up for another 25 years will likely lower your repayments but it can leave you on the home loan hamster wheel for a lot longer, and inflate your long term interest cost.