Recent changes announced by Treasurer Scott Morrison to the 2016 Budget’s super reforms fail to meaningfully boost women’s super and mostly favours the asset rich or wealthy.
Women have around 50 per cent less in their superannuation accounts than men, largely because of time spent out of full-time work caring for loved ones and earning less on average than men.
“There were provisions which I think remain which are aimed to assist “low income earners” however I would argue that not all women are low income earners,” says lea Schodel who runs her own financial advice practice.
“It’s a combination of lower salaries but also time out of the work force, broken work patterns to raise children or care for relatives or parents, that really impact a woman’s superannuation savings.”
The average Australian woman has around $55,000 in her super fund compared to $98,500 for men, according to AustralianSuper.
Another report published in the Australian, which cites Industry Super Australia which projected that by 2030, the gender super gap could widen to 39 per cent with women having an average balance of $262,000 and $432,000 for men.
So what we have is a system where most women either don’t have enough in super to live comfortably in retirement and given that the average full-time wage is around $70,000, many women will not have the means to build their super to these levels in the years ahead.
Unless specific measures are announced to support more families, particularly working mothers around childcare, and improving women’s pay in certain sectors, then it is going to be difficult for many women to grow their balances to where they need to be.
What’s the latest super changes?
Last week Mr Morrison announced that the government plans to save around $1 billion over the next decade by changing the super system…again.
One of the main and few measures originally announced in the budget that helped address the superannuation shortfall for women, namely working mums, has now been delayed.
This was next year’s introduction of a measure to carry forward any unused pre-tax or ‘concessional’ contribution cap amounts over the past five years.
But now the start date will be pushed back to 1 July 2018 and only then will women be able to catch up on those years of missed pre-tax contributions once they returned to work and put more into super.
This puts working mothers at a disadvantage because it means that any time currently spent out of the workforce currently may not count in terms of the five year catch up.
Perhaps the brightest news was the announcement of personal tax deductions for contributions for anyone under 75 years of age.
“This is good news for people who may wish to offset a capital gain or reduce tax, whilst also boosting their super balance,” says Schodel. “This incentive was previously only available to self-employed people or those not receiving employer SG contributions.”
There is a little more incentive for partners to help build the super balances of women on lower incomes with an increase in the low income spouse tax offset to $37,000 per annum, compared to $10,800 per annum.
And lower income earners will also be entitled to a tax offset via a refund of contributions tax paid on concessional contributions, up to a limit of $500.
Mr Morrison also delivered a shift back to an annual cap on after-tax or ‘non-concessional’ contributions to $100,000, from $180,000, which allows those who have the money to put more into super the ability to do so without being as restricted.
Previously, those nearing retirement with smaller superannuation balances we restricted by a $500,000 lifetime cap, which went back to 1 July 2007.
Lindzi Caputo wealth manager at HLB Mann Judd says where possible, women should be looking to take advantage of the following provisions announced in the Budget to help build their super.
– For the 2017 financial year the previous non-concessional contribution rules apply so if women close to retirement have cash available outside of super they should consider utilising the higher $180,000 non-concessional contribution cap before 30 June 2017.
– From 1 July 2017 look to use the $100,000 non-concessional contribution limit or use the 3 year bring-forward provision where those under age 65 are able to contribute up to $300,000 over a 3 year period. This provision can be useful where an inheritance is received or the family home is downsized close to retirement.
– From 1 July 2019 women who have been out of the workforce and have a super balance of less than $500,000 should consider using a salary sacrifice strategy to catch up on missed concessional contributions.
Those with super balances over $1.6 million will not be able to make further non-concessional contributions.