The Government fleetingly made a proposal to introduce a new compassionate ground for early access to super allowing domestic violence victims to withdraw $10,000 from their superannuation. Thankfully, this idea was quickly shelved.
In my experience, women are already disadvantaged when it comes to superannuation savings. As of June 2020, the average superannuation account balance was $77,479 for females and $95,257 for males.[1] Women aged between 55 to 64 approaching retirement on average have $245,100 in their superannuation fund. Men on average for the same age bracket have $332,700.[2]
A report by Monash University commissioned by Australian Super found that women in retirement are likely to be the largest group of Australians living in poverty.[3]
What can women do to help prepare for their own financial future? Below are some quick tips women can consider helping build their future savings for retirement:
Government co-contribution
A quick way to get up to $500 in your superannuation fund.
This is where if you make a $1,000 deposit from your personal bank account into your superannuation fund (called a non-concessional contribution) the Commonwealth Government will match it with up to $500. If your income is under $38,564 your $1,000 will be matched with the full $500. The Government co-contribution stops for people earning more than $53,564. If you are earning between these two amounts the contribution will reduce by three cents for every dollar earned over the bottom threshold.
This is a really good way for part-time and casual workers to top up their superannuation. For women who have worked part of a financial year due to taking maternity leave, you may find yourself eligible for the Government co-contribution based on reduced income earnings.
Spouse contribution
If you are earning under $40,000 you can also take advantage of the Spouse Contribution Tax Offset. This is where your spouse who is working can make a special contribution of up to $3,000 from their personal bank account to your superannuation fund. The benefit is they will get up to $540 as a tax offset. A tax offset is where their tax liability is reduced. Again, this is beneficial if you are working part time.
Catch-up concessional contributions
If you have a superannuation balance under $500,000, you may be able to retrospectively apply any unused concessional contributions back to the 2018/2019 financial year.
What is a concessional contribution? These are the contributions made by your employer to your superannuation fund or any additional contributions you have chosen to make to your superannuation fund via a salary sacrifice arrangement. Currently the annual cap per financial year is $25,000 and this may increase to $27,500 after the 1st July 2021.
For example, if in the 2019/2020 financial year your total concessional contributions amounted to $10,000, you could make a further $15,000 in addition to the concessional contribution cap this financial year to ‘catch-up’ on previous financial years where you did not maximise the cap.
This is a particularly helpful strategy for a financial year where you may have earned an additional bonus or have sold a large asset such as an investment property. Recently I have given advice to a client to use their unused concessional contribution caps from the last two financial years. We were able to save approximately $15,000 in income tax for them as concessional contributions are taxed at 15% (if your income is under $250,000) as opposed to your marginal tax rate which can be as high as 45%.
Still a long way to go
Ultimately, we have a structural problem where women are disadvantaged by taking time off work to give birth and to raise children. Research has also shown there is a detrimental effect of part-time work on opportunities for promotion and moving jobs. Until we decide as a nation that we value the role women have in our society and help to remunerate them and their Superannuation contributions appropriately, the above strategies can help to prepare for a better retirement.
References:
1. APRA Annual superannuation bulletin – highlights June 2020 (released 29 January 2021) (pdf)
2. ASFA Superannuation Statistics June 2020 (pdf)
3. Riach, O’Hare, Dalton and Wang (2018) The Future Face of Poverty is Female: Stories Behind Australian Women’s Superannuation Poverty in Retirement (pdf)
Additional sources:
How much super should I have at my age?
Annual fund-level superannuation statistics
Andrew Zbik
Senior Financial Adviser
Creation Wealth
0422 038 253
andrew.zbik@creationwealth.com.au
www.creationwealth.com.au