The dream of home ownership is fading for many young people as concerns over property prices grow.

A news.com.au exclusive prompted the ATO to release a statement clarifying that it will not be loosening superannuation rules in light of housing affordability concerns.

Assistant Commission Kasey Macfarlane warned that anyone caught breaking super rules risked losing their retirement savings in penalties.

“In the most serious cases, individuals can possibly lose up to almost half of their retirement nest egg.”

News.com.au reported last week in this article that the ATO may be about to relax the rules around buying property within self managed super funds.

Property investment firm DomaCom, which claimed that it had received advice from the ATO, said self-managed super funds would potentially not be in breach of the rules if they bought property and allowed a related person to live in that property, as long as the super fund owned less than 50 per cent of that property.

The report follows calls for younger Australians to be able to use their superannuation savings to buy property given expensive house prices in popular city areas.

Higher house prices are being driven by record low interest rates, population growth and lucrative tax incentives.

Earlier this year, former Treasurer Joe Hockey flagged the idea of being able to use super savings to buy property in a Fairfax Media report.

The SMSF Association (Self Managed Super Fund Association) slammed the proposal and warned it would be irresponsible.

Currently the average Australian woman has only $54,000 in a super fund, while men have around $90,000, according to Australian Super figures.

Those with self-managed super funds, which can buy property using their savings but not to live in, have significantly higher account balances.

The ATO said it has no intention of changing the rules.

“The ATO does not condone and will take serious action with respect to any promotion of SMSF investments as a means for providing present day benefits for members, their relatives or other related parties. This includes the provision of residential accommodation to related parties such as children of SMSF members.

“Contrary to statements made in the media, the ATO is not considering allowing broader use of SMSF assets beyond the sole purpose of providing retirement benefits for members or benefits for their dependants upon death,” says Ms Macfarlane.

“Ensuring SMSFs are established and maintained for the sole purpose of providing retirement benefits for members and benefits to their dependants on death, as well as ensuring compliance with the regulatory requirements and restrictions that apply to SMSFs, is paramount to the ATO’s role as the regulator of SMSFs.

“The use of SMSF property investments as a means of providing residential accommodation to SMSF members’ children and other related parties contravenes the requirement that an SMSF be established and maintained for the sole purpose of providing retirement benefits for members or benefits for their dependants upon death.

“The use of any SMSF investment as a means for providing a present day benefit for members also directly contravenes other superannuation regulatory rules and restrictions that apply to SMSF investments.”

Breaching the superannuation laws carries serious consequences such as significant administrative penalties and the loss of the ability of individuals to manage their retirement savings because they are disqualified as a trustee.

“I would urge SMSF trustees uncertain about the regulatory restrictions applying to any investments that they have undertaken or are planning to undertake in their fund to seek independent professional advice or contact the ATO.”

- Bianca Hartge-Hazelman is the founder of women’s money magazine Financy.com.au.