There’s been a lot of buzz this week about the federal government’s proposed changes to superannuation, which will see earnings on super balances above $3 million taxed at a rate of 30 per cent.
The change effectively doubles the tax rate – up from 15 per cent – on super balances for the 80,000 people in Australia who have more than $3 million in their account. These people will continue to benefit from the 15 per cent tax rate for earnings from assets below the $3 million mark.
According to the government, 99.5 per cent of super accounts in Australia have less than $3 million, meaning just 0.5% of people will be impacted by the reform.
The change is scheduled to come into effect after the next election, in the first half of 2025.
The government says it will collect about $2 billion every year from the changes, which will only affect a small number of Australians with large super balances.
How will this affect women?
In Australia, there is a significant gender gap when it comes to superannuation, with women retiring, on average, with much less superannuation than men.
According to KPMG, for those aged 55-59, the gender super gap is 33 percent, while in the peak earning years of 45-49, the gender gap is 35 percent. As a result, older women in Australia are the fastest growing group of people experiencing homelessness and poverty.
This gender gap in super means women are much less likely to be among the 80,000 Australians that will be affected by the government’s changes.
What else should we consider?
On the ABC’s 7.30 program on Wednesday, Independent MP Allegra Spender, who represents one of the wealthiest electorates in the country where people are more likely to be impacted by the government’s changes, said her community “is more open to it than you would think”.
She made the point that people will have a chance to vote on the changes to super, because they are not scheduled to come into effect until 2025 – after the next federal election.
Should we pay super on paid parental leave?
Elsewhere, a number of crossbench MPs have put forward the idea that the $2 billion collected each year from the changes could be used to fund superannuation entitlements for those taking paid parental leave. This would help close the superannuation gender gap, which is exacerbated when women take time out of the workforce for caring purposes.
Currently, parents do not receive superannuation payments while receiving government paid parental leave.
Zoe Daniel said she would like to see the government consider using this reform to bring in superannuation payments to paid parental leave. She noted women in her electorate of Goldstein have $54,000 less in super than men when they retire.
“I’m particularly interested in how the government plans to spend that revenue, including the potential to add superannuation entitlements to Paid Parental Leave, given that women already have far lower super balances than men and are at greater risk of poverty and homelessness in retirement,” Daniel said in a statement.
Kylea Tink and Dr Monique Ryan have also said they would support the revenue being used to implement super entitlements on parental leave.
“It’s a no-brainer. The small cost of adding superannuation payments to paid parental leave would send a strong signal to women and Australian families that they deserve equal footing to everyone else,” Tink said.
“Paying super on paid parental leave will help decrease gender inequity. It’s only fair,” Ryan said.