The Federal Budget includes significant changes to superannuation, plus tax cuts for many businesses and families but it has not gone far enough to directly boost the retirement savings of women.
Instead what we have are a dozen-or-so changes to superannuation rules, announced by Treasurer Scott Morrison, some of which are great, but many people will still find the system’s rules confusing and these changes difficult to use to their advantage without expert advice.
Most of the measures target restricting the super savings of the wealthy and only a handful that go some way to addressing the inequity that exists for women, who tend to retire on half as much in super savings as men because of less pay and time out of the workforce.
The government also appears to have “parked” most of the 19 recommendations made in last week’s report from the Senate Inquiry into women’s economic security in retirement.
Here’s what’s in Budget that does help women:
Allowing catch-ups – This helps mums or those caring for loved ones.
From 1 July 2017, the government will allow people with less than $500,000 in their super funds to make the most of a rolling annual limit – otherwise known as the concessional (before tax) contributions cap – for a period of five consecutive years.
This means that if you go on parental/maternity leave, or take time out to care for loved ones, that when you return to work, you can top up your super up to the limits.
The FIVE year limit in this is potentially troubling because it hurts those families who have more than one child in a short space of time.
The way to get around it would be to save hard in the years that you can afford to do so and keep working around child caring.
Removing the work-test – This helps older women.
From 1 July 2017, the government will remove the restriction on people between 65 to 74 years of age to be gainfully employed for at least 40 hours within a 30 day period prior to making a contribution into super.
This means that older women, many of which currently have very low balances could keep working and potentially top up their retirement savings.
Tax refunds and tax offsets – seek tax advice on this one.
Women may be eligible to get up to a personal $500 tax refunded for super contributions, if they earn less than $37,000. Plus the partners of women will also get tax offsets if they put money into a low-income spouse’s super.
Outside of super, the other Budget measures which should help women include the broadening of the middle income tax bracket. This change means you can earn up $87,001 without paying more than 32.5 cents in the dollar in tax.
The way to boost your super in relation to this measure is to use that extra cash flow which won’t be hit with that 37 per cent rate, by topping up your superannuation.
And attention businesswomen and mumpreneurs: If you’re running a small to medium sized business, you’ll soon be paying less company tax.
The Treasurer said the tax rate will be gradually lowered for small to middle sized businesses from 28.5 per cent to 27.5 per cent and said from 2026-27, all business will pay a rate of 25 per cent.