Childcare subsidies and support for more women in the workforce or income tax relief? These are just some of the “Australia votes” election promises that women stand to benefit from, problem is they’re not from the same political party.
Australian working women have a choice this federal election: they can vote to improve their own financial position by a little, and possibly a lot.
Until recently I thought the election choice was pretty simple, but now it’s more complicated and I’m admittedly enjoying the tussle for the female vote.
Both the Coalition and Labor parties have made announcements, in and outside of their recent budget speeches that will go some way in assisting the financial wellbeing of women with respect to pay and superannuation.
If we exclude talking property just for this post, here’s what’s been the most significant to date for women:
- A promise by both parties to increase personal tax cuts for low and middle-income earners – many of whom are working women.
- Labor’s $4 billion promise to subsidise childcare, and even make it free for low income families.
- The Coalition has promised to increase the age limit for spouse superannuation contributions to even up balances given that women’s balances are on average 30-40 per cent lower than men’s accounts.
- Labor has vowed to include employer superannuation contributions on certain paid parental leave schemes and reduce the compulsory superannuation guarantee contribution threshold to nil from $450 a month, which will go a long way to supporting casual workers – many of which are women working around caring responsibilities.
So if we look at the average working woman on roughly $65,000 a year, here’s how some of the key election promises may affect her money.
If elected, Labor under Opposition Leader Bill Shorten has promised to:
- Increase childcare subsidies for families. Those on household incomes up to $174,000 will be about $1200 a year better off per year, per child, while those families earning up to $69,000 would get their childcare for free. For households earning between $70,000 and $100,000, the subsidy would increase to somewhere between 85 to 100 per cent of the hourly fee cap. Labor says this would make childcare free for about 370,000 families, saving them on average $1,400 a year. For those with an income between $100,000 and $175,000 it would be between 60 and 85 per cent. For those earning above this amount there is no change.
It means, that if the cost of childcare is lowered and therefore becomes more accessible, this should lead to a greater number of women in the paid workforce and more money in the pockets of families overall.
Labor has also promised a 20% wage increase for early childhood educators over eight years – the majority of whom are women.
If re-elected, the Coalition under Prime Minister Scott Morrison has promised to:
- Increase personal income tax brackets from July 2022, starting with the 19 per cent tax bracket for earnings up to $45,000; and introducing a 30 per cent mega tax bracket of $45,000 and $200,000, effectively removing the 37 per cent tax bracket.For the average full-time working woman on roughly $65,000 a year, this means a tax savings of around $1,581.
- Increase the Low Middle Income Tax Offset to $1,080 for people earning between $48,000 and $90,000.It means: Individuals with taxable incomes up to $37,000 will have their tax reduced by up to $255. This will increase incrementally for those earning between $37,000 and $48,000. The maximum offset of $1,080 will be available to taxpayers with taxable incomes between $48,000 and $90,000. The offset then gradually reduces to zero at a taxable income of $126,000. The offset will be received as a lump sum on assessment after individuals lodge their tax returns.
If elected, Labor under Opposition leader Bill Shorten has promised to:
- Match the Coalition’s Low Middle Income Tax Offset, plus workers earning up to $37,000 would also receive a bigger $350 tax offset.
- Decrease the Capital Gains Tax discount from 50 per cent to 25 per cent on the sale of investments purchased after January 1, 2020.
- Disallow negative gearing losses to be used to offset against salary income(excluding new residential premises). Instead, these losses can be used in reducing any gain from the disposal of the asset.
- Increase the top tax rate to 49 per cent. This means less money for high income earning families and has no impact on the average full-time working woman.
- Place a $3000 limit on individuals claiming a tax deduction for tax agent fees. This is likely to affect women in business or those with more complicated tax affairs.
- Disallow cash refunds of excess franking credits, excluding government pension recipients. This means that women on low incomes paying less than 30 per cent in tax will no longer be able to receive cash refunds for dividend franking credits. This could equate to hundreds of dollars they miss out on (and most probably rely on) each year. This will also affect self-managed super funds paying pensions.
- Increase the instant asset write-off from $25,000 to $30,000. This is a win for women running their own or family business and it can greatly reduce the tax paid by the business.
- Introduce a minimum tax rate of 30 per cent, instead of a person’s marginal tax rate, on all trust distributions made to persons over 18 years old.
This may disadvantage women (and/or men) on low incomes, paying less than 30 per cent tax, who receive trust distributions from family trusts to supplement their income while taking a break from work to have/raise children.
- Increase the spouse super contribution age limit to 74 years – this is the age of the spouse receiving the contribution. This will help the recipient spouse with a smaller super balance, usually the non-working wife, to increase their super. The contributing spouse may have received this extra money through a retirement payout, selling their business, or receiving an inheritance, which they wish to contribute as a spouse contribution. As people are working and living longer, this is happening later in life so the increase to 74 is important.
- Extend the employer superannuation guarantee (SG) contributions to include paid parental leave payments to include those on a Commonwealth scheme.Currently, commonwealth paid parental leave is $719.35 a week before tax for a total of 18 weeks per child.This would mean super of $68.33 per week would be added – at 18 weeks this equates to $1,230.
- Decrease the threshold for compulsory SG contributions from $450 to NIL over four years. This will help those working a number of small casual jobs, mainly younger workers and women, to ensure they receive super.
- Plans to decrease non-concessional contribution (after tax contribution) cap from $100,000 to $75,000. This will restrict the amount of catch up payments women can make to rebuild their super after career breaks. Until there is no gender pay gap, such concessions don’t address the basic problem of differential contributions.
- Proposal to reduce threshold for Division 293 tax on contributions to $200,000. This means that anyone with taxable income over this amount will pay an extra 15 per cent tax on concessional contributions – that is employer SG and personal tax deducted super contributions.
Prior to Labor’s childcare promise, the Coalition’s personal income tax cuts were likely to be “hands down” more beneficial to the average working woman.
But with families likely to be significantly better off with childcare support, the choice becomes more obviously Labor.
That said, it really depends on whether or not you have children, and even then, how many are actually under five years of age?
Longer term, it would seem that Coalition tax cuts could be the election winner for many women.
Although, if greater childcare support helps more women return to the workforce and in turn narrows the gender pay and superannuation disparity, then it is clear to me that Labor could in fact be better for the average working woman.
This Financy article is an updated version of one provided to Yahoo Finance.