Photo by Goh Rhy Yan on Unsplash
Australia's financial services regulator is placing the real estate industry on watch after discovering some agents are advising at-risk tenants of dipping into their super.
In a letter titled Dear "[Real Estate Institute]", The Australian Securities and Investments Commission (ASIC) noted that it is aware some real estate agents are advising tenants who are unable to pay their rent to consider applying for early release of their superannuation.
Such an action is now possible thanks to a recent government stimulus measure allowing people affected by COVID-19 to withdraw up to $20,000 from their super balances.
While there are pros and cons of withdrawing from superannuation to pay for emergency expenses during COVID-19 (more on this later), a real estate agent telling a tenant to do so constitutes personal financial advice - something they are not licensed to give.
Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.
Lender | Advertised rate | Comparison rate* | Monthly repayment | Rate Type | Offset | Redraw | Ongoing Fee | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Pre-approval | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Variable | More details | ||||||||||||
| FEATUREDLIMITED TIME OFFER | Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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| Fixed | More details | ||||||||||||
| NO UPFRONT OR ONGOING FEES | Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years | ||||||||||||
| Fixed | More details | ||||||||||||
Fixed Home Loan 2 year (Principal and Interest) (LVR < 80%)
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| Variable | More details | ||||||||||||
| 100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES | Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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| Variable | More details | ||||||||||||
| FEATUREDZERO APPLICATION FEESFEE FREE OFFSET | Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)
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Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)
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| Variable | More details | ||||||||||||
| FEATUREDREFINANCE IN MINUTES, NOT WEEKS | Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)
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Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)
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- Fast turnaround times, can meet 30-day settlement
- For purchase and refinance, min 20% deposit
- No ongoing or monthly fees, add offset for 0.10%
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of January 25, 2022. View disclaimer.
In its open letter to "the Real Estate Institute", ASIC said such conduct by real estate agents is of significant concern.
"ASIC is aware that some real estate agents are advising tenants who are unable to pay their rent, or who may find themselves in such a situation in future, to consider applying for early release of their superannuation," the regulator said.
"We are concerned that the conduct by real estate agents referred to above may:
- constitute unlicensed financial advice in contravention of section 911A of the Corporations Act; or
- not be in the best interests of individuals in contravention of section 961B of the Corporations Act."
This sucks so bad - ASIC says it is aware some real estate agents are advising struggling renters to dip into their super to make payments pic.twitter.com/AgxvXW4FYB
— Alex Druce (@AlexDruuuce) April 2, 2020
According to ASIC, financial advice must only be provided by "qualified and licensed financial advisers or counsellors", and not by real estate agents unless they hold the requisite licence.
A breach of the corporations act imposes significant penalties, and agents found in violation could face a penalty of up to $126,000 and a maximum of five years in prison.
Corporations meanwhile could be fined up to $1.26 billion dollars.
"Tenants facing financial difficulty need sound financial guidance and potentially debt counselling," ASIC said.
"Specifically pointing them to and recommending them to consider the specific possibility of accessing superannuation is, again, likely to amount to a breach of the Act."
"ASIC intends to monitor this situation closely, and if contraventions of the licensing requirements of the Corporations Act are found, ASIC will not hesitate to act swiftly to protect vulnerable consumers."
ASIC was initially tipped off to such actions from Shadow assistant treasurer Stephen Jones, who wrote to ASIC earlier in the week raising concerns about agents giving unqualified financial advice.
According to Nine newspapers, Mr Jones said renters should be able to make decisions "based on financial advice that is in their own best interests and free from the conflicted interests of other agents".
"Financial advice should only be provided from qualified advisers and financial counsellors, not their real estate agent," Mr Jones said.
"We ask you to consider issuing a warning on this matter."
The Prime Minister announced a six-month moratorium on evictions earlier this week preventing landlords from evicting tenants if they are unable to pay rent due to financial distress as a result of the COVID-19 pandemic.
The National Cabinet is also meeting again today to discuss the housing market, with renters likely on the agenda again.
When should you withdraw from your super?
When the announcement that Australians could withdraw from their super balances was announced, the government stressed how necessary such a measure could be for vulnerable Australians.
Disclaimers
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.
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Labor Leader Anthony Albanese has warned of the consequences of withdrawing from your retirement fund at the bottom of the market.
“Selling your super at the bottom of the market will risk squandering people’s hard-earned retirement savings,” the opposition leader, Anthony Albanese, told parliament in response.
“It is also the case if the superannuation industry is forced to sell assets at the bottom of the market. That also is not sensible economics.”
Spaceship Super CEO Andrew Moore also told Savings.com.au there are dangers with withdrawing too much too early.
"Most of Spaceship’s superannuation members are millennials, which means they typically have many years to ride out the ups and downs of investment markets before they reach retirement age.
"When on better footing, members might want to consider whether to make voluntary contributions to top up their super balance."
With the general consensus being that withdrawing from superannuation should be used as a last resort, it is perhaps understandable why ASIC is so concerned with real estate agents providing such advice.