Date posted: 24/02/2022

The superannuation ceiling is the new glass ceiling: Let’s make super fairer for women

Replacing the annual superannuation contribution cap with a lifetime one would boost women’s super balances and make the system fairer.

The Workplace Gender Equality Agency published its annual report today, showing women earn almost $26,000 less than men and that women are less than twice as likely to earn more than $120,000 a year compared to men. 

And yesterday the Federal Government passed legislation to remove the $450 threshold to receive super, which according to their own statistics will benefit 300,000 employees, 200,000 of whom are women.

“While we are talking about problems and solutions when it comes to equality for women, let’s talk about superannuation,” said CA ANZ Superannuation Leader Tony Negline.

“Super is a ticket to financial independence and a secure retirement, and we need to remove the unfair policy barriers that are stopping women achieving that.”

In its pre-budget submission this week, CA ANZ is calling on the Federal Government to level the playing field for women already at a financial disadvantage to their male counterparts.

As of this year, Australians can contribute up to $27,500 per year to superannuation – paid predominantly through the superannuation guarantee of 10 per cent of their salary, which they can then top up with voluntary contributions. 

Those contributions are treated in a favourable way compared to income, attracting a tax rate of 15 – 30 per cent, compared to income taxation rates as high as 45 per cent. 

“While the system seems fair on face value, the annual superannuation contribution cap actually works against women,” Negline said.

“The reason is that as Australians approach retirement, often they have more disposable income because their kids have left home, their mortgage is more under control or they have moved up the career ladder thanks to years of experience. 

“At that point, a person, for example in their mid-50s, might want to use some of their disposable income to make extra contributions to invest in their superannuation and retirement, which is where women come up against a brick wall. 

“Women often take the lion’s share of career breaks and part-time work in order to care for children or the elderly, meaning they are paid no or less superannuation over formative career-building years.

“Our CA Gender Pay Gap Report last year found that half of women CAs surveyed had taken a significant career break compared to only 15% of men CAs, with the main reason being to care for children.

“And now when those same women are back in the workforce and in a position to top up their superannuation balances, they’re hit with an annual cap that means they can’t. 

“On the other side, men have typically been continuing their careers – and therefore their superannuation contributions – throughout the whole period, and therefore have raced ahead.” 

Data from WGEA’s 2020 report, Women’s Economic Security in Retirement, found women at retirement age have accrued on average 50 per cent less in superannuation than men. 

“Many of the levers Government can pull to address the gender pay gap have an indirect effect – but scrapping the annual super contribution cap could directly influence fairer outcomes for women,” Negline said. 

“The Government’s passing of legislation yesterday to remove the $450 threshold for super is certainly welcome and will benefit 200,000 women which is fantastic – but let’s talk now about next steps. 

“Now is the time to double down on this great policy and scrap the annual cap to create even more equality for women.”  

Negline, said that the organisation supports the need for limits on how much can be contributed to superannuation, but the current system is not fit for purpose. 

Under the current rules, once a person’s total superannuation balance has exceeded the general transfer balance cap (currently $1.7 million), then a range of policies kick in. For example: 

  • No further non-concessional contributions are permitted 
  • Government co-contributions cease to be made, and 
  • Contributions made by a spouse are not eligible for the spouse tax offset. 

“CA ANZ wants to see these policies remain in place to ensure a fair and balanced tax system, but removal of the annual caps which create an unfair situation for women,” Negline said.           

“With our Budget just around the corner, now is the right time for the Federal Government to give this matter the attention it deserves.” 

Read our coverage 

Our advocacy on this topic ran in Accountants Daily.

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