CARITO tax credit for carers will boost moves to gender equality

KPMG

An income tax credit for carers returning to the paid workforce has been proposed in a new KPMG paper, as part of a wider effort to properly value time dedicated to unpaid work.

The report, Towards a new and improved era in women’s equality: valuing unpaid work, contains several ‘affirmative action’-based proposals which address the imbalance of unpaid work being largely done by women. It is the tenth in KPMG’s gender equity series of papers.

KPMG’s proposed Carers’ Income Tax Offset (CARITO) could have similar design features to those of the Low and Middle Income Tax Offset (LMITO) that has been a feature of the Australian tax system. It would be a non-refundable tax offset, credited against any income tax payable upon people returning to work after caring for children, people with a disability or elderly parents.

The maximum amount of CARITO would be calculated as the basic offset amount multiplied by the number of years of unpaid caring work performed. As an example, if the CARITO base were $100 per week and the carer took five years away from work, the CARITO amount of $100 x 5 x 52 weeks = $26,000 would be credited to the carer’s tax account held with the Australian Taxation Office (ATO) to be offset against the carer’s income earned upon returning to paid employment.

Alison Kitchen, KPMG Australia Chairman, said: “Under this proposal, carers on lower incomes would gain a larger proportional benefit on their return to work – the credit would be equal to a larger proportion of their income tax paid, making it progressive. Furthermore, by not phasing the credit out as the recipient’s income rises, additional work and career progression would not be disincentivised. The proposed CARITO would not be gender specific and might provide a reasonable incentive for men to take up more equal sharing of caring responsibility.”

Another key proposal in the paper is to ensure employers are able to enact affirmative policies in order to provide higher superannuation payments and other workplace benefits to their female employees. This recommendation, which would help to address the super and pay gaps, could be achieved either by amending the Sex Discrimination Act or by developing clear guidance to employers on how they could apply for exemptions from the Act to allow them to pay women higher super contributions.

Alison Kitchen said: “Allowing employers to make higher superannuation contributions for female employees is an obvious move and would be a continuation of the principles enshrined in the 1986 Affirmative Action Act, which require companies to proactively support women’s participation to overcome engrained social norms. Ironically, it is the landmark Sex Discrimination Act that makes it difficult for employers to do so, unless they can successfully navigate a lengthy process. In 2016, the Senate Economics Reference Committee recommended amending the Act but it has not happened. We would encourage the new federal government to look again at this.”

The paper addresses ingrained social norms which disadvantage women. Australian females still do around two-thirds of the unpaid work, which is not valued or measured in the same way as paid employment. A failure to recognise the value of unpaid work continues to result in women’s inequality.

Yet in the world of paid work, these same ingrained norms produce social and economic equities in the form of gender pay and superannuation gaps.

Alison Kitchen added: “Women in Australia, and throughout the world have been fighting for equality for well over a century. There have been periods of important change and improvement but we still have major barriers to equality inside and outside the workforce. The proposals in this paper, together with those of our previous reports, would be important steps in the road to a new era of gender policy reform.”

In addition to proposals for a CARITO and amending of the Sex Discrimination Act, the paper also reiterates KPMG’s two of previous gender equity recommendations; firstly by including Superannuation Guarantee contributions in the Commonwealth paid parental leave scheme and secondly by increasing the paid parental scheme to 26 weeks, with a more equitable sharing of leave between partners.

Collectively, these reforms could spearhead a new era of reform towards greater equality for women, the report argues.

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