Superannuation changes may help close the gender gap

Relaxed retired woman wearing shawl sitting on sandy beach. Old caucasian woman sitting on the beach looking at camera outdoors

The federal government has confirmed in its new super tax measures that it will reverse its previous decision to abolish the Low Income Super Contribution.

Now called LISTO (Low Income Super Tax Offset), the new measure will prioritise tax breaks for Australia’s 3 million lowest income earners, 2 million of whom are women.

LISTO is a government payment of up to $500 per year into the super of those earning under $37,000. It will cover half of all working women.

Part-time work patterns, lower paid positions, and career breaks to care for family members all mean the average Australian woman retires with a superannuation nest egg a little over half the size of the average Australian man.

Robbie Campo, Deputy Chief Executive of Industry Super Australia, says the changes to the super system currently before parliament will go some way to making things fairer for Australian women.

“The current tax concessions on super are skewed to high income earners, most of whom are men,” she said.

“Currently almost two million working women are given little or no tax concessions on their super contributions. The most important change the government is making to super tax measures is to trim the very generous benefits given to high income earners (mainly men), and reversing their previous decision to abolish the LISC (low income super contribution).

The LISTO will add thousands of dollars to the average woman’s retirement balance, Campo says. She adds that some co-contribution can still be paid for people earning up to $51,021 if they make after-tax contributions.

Other key changes that will help boost women’s retirement income include:

  • Increasing superannuation from 9.5 per cent to 12 per cent phased in gradually by 0.5 per cent a year over 2021 to 2025. The SC increase is the single change that will have the most impact in terms of improving the average level of retirement savings of women. This was a Labor government initiative that has been delayed by the current federal government until 2021.
  • Low-income threshold raised for spousal contribution. Spousal contributions allow higher earning spouses to receive a tax rebate of 18 per cent for making a contribution into the super of a lower earning spouse. This measure has been expanded so that the lower earning spouse can earn up to $40,000, up from $13,800. The maximum contribution that can be made to attract the spousal rebate is $3000 for a rebate of $540.
  • A five year “catch up” plan for concessional annual contributions may help women with fluctuating incomes and those nearing retirement. People will be able to make “catch up” concessional (pre-tax) contributions if in the previous five years they have not used up all the concessional caps on super. The government plans to defer this measure for one year, to 1 July 2018.

Industry super funds easily outperform bank funds

Independent data measuring the performance of Australia’s superannuation funds shows not-for-profit industry super funds continue to outperform “for profit” bank-owned funds in the short, medium and long term.

The latest SuperRatings’ monthly data shows, on average, industry super funds have recorded a superior performance of 2.2 per cent over 10 years.

 

  Rolling 1
Year %
Rolling 3
Year %
Rolling 5
Year %
Rolling 7
Year %
Rolling 10
Year %
Industry Super Funds 7.16 8.56 9.65 8.3 5.82
Bank-Owned Super Funds 4.49 6.34 7.77 6.30 3.61
Outperformance 2.67 2.22 1.88 2.00 2.21