Should first-home buyers be allowed to use their superannuation for a deposit?

Saving for a home deposit is tougher than ever. Rising rents, climbing property prices and stagnant wages are leaving many Australians feeling locked out of the market. 

So to address this, the Liberal Party has proposed a policy allowing first-home buyers to withdraw up to $50,000 from their superannuation to help with a deposit. While the idea has sparked plenty of debate, it does offer a potential pathway for struggling Aussies to finally achieve home ownership.

Mortgage broker Brett Sutton from Two Red Shoes Mortgage Brokers explains that home ownership aligns with the goal of super.

“Superannuation is designed to provide Australians with financial security in retirement,” he says. “But for many, homeownership is just as critical. Owning a home represents stability and eliminates the ongoing cost of rent, which can be especially burdensome in retirement when you’re living on a fixed income.”

Weighing the trade-offs

The proposal could appeal to those who view housing as an essential part of retirement planning, as owning a home brings both financial and emotional benefits including:

• Owning a home removes rent in retirement. This frees up superannuation for other costs.
• Housing is a long-term asset. Like super, property builds equity and appreciates over time.
• It provides peace of mind. Homeownership offers security and stability, reducing financial and emotional stress later in life.

‘“In my opinion, the policy aligns with super’s goals by helping first-home buyers use their savings to enter the housing market and build long-term financial stability. It’s about balancing retirement savings with the more immediate need for a secure place to live. For many Australians, the equity and security of home ownership will outweigh the impact of a slightly reduced super balance,” Sutton said

However, critics warn that dipping into super could be costly. Sutton explains:

"The strongest argument against it is that super relies on compounding growth over time. We saw concerns during COVID when people withdrew early, and what that did to their long-term balances. The same argument will come up here—strict super advocates will say it undermines the purpose of super and puts retirement savings at risk.”

Critics also argue that the proposal doesn’t address the underlying issue of housing affordability. Without increasing supply or tackling rising demand, policies like this may inflate prices while leaving super balances depleted.

"This policy could help more people enter the property market, but it doesn’t address the root issue: affordability," Sutton says. "Housing is just so expensive, and that’s the biggest constraint. Fixing that will take time, but in the meantime, this could still help people get into the market now—especially if used alongside other schemes like the First Home Super Saver Scheme."

Additionally, the proposal is more likely to benefit older first-home buyers than younger Australians. For those in their 30s or older, who’ve had time to build a decent super balance, accessing up to $50,000 could make a big difference.

For younger buyers, though, the policy may not be enough. 

“The scheme caps withdrawals at $50,000 or 40% of your super balance. So, if you’ve only got $50,000 in super, you’d only be able to take out $20,000—which isn’t much help for a deposit,” Sutton says.

Replenishing your super

The idea isn’t just to let people take money out of their super with no strings attached. Under the proposal, buyers would have to pay back what they withdrew, plus a share of any capital gains, when they eventually sell the property.

That’s why Sutton believes it’s important for buyers to fully understand what they’re signing up for and how to offset the impact on their super balance. 

“Education is an important part of it. People need to understand how to make tax-advantageous concessional contributions back into their super over time to catch up to their original position,” Sutton said.

A piece of the bigger picture

Getting into the housing market is tough, and this policy is trying to make it easier. For some first-home buyers, tapping into super could be a real boon, but it’s not as simple as just withdrawing the money and calling it a day. Whether it actually helps will come down to the details: how it’s structured, who benefits, and what the trade-offs are.

One thing is for certain, if you want to make the most of your super, whether it’s to help you buy your first home (should a policy like this pass) or you simply want to ride it out to retirement, you definitely want a fund that performs to your expectations.

So why not check out our Mozo Experts Choice Superannuation Awards to find out who our experts have identified as the best performers across a number of categories - based on rigorous analysis into returns, fees, product options and more.