- New report frames strategy to close the gender superannuation gap
- Primary Carer should receive rebate on 15 percent Superannuation Contributions Tax
KPMG Australia has reinforced the firm's commitment to achieving gender equality in the workplace with the release of its latest paper Options for addressing the gender superannuation gap.
This report, the eighth in the KPMG series, proposes that a primary carer - usually a woman - should receive a rebate on the 15 percent Superannuation Contributions Tax (SCT) paid on contributions made for up to five years following the period out of the workforce. In effect, that means the primary carer would be compensated for superannuation "lost" while at home caring for children.
The aim would be to allow the carer to catch up on half of the mandatory concessional contributions that would have been made had s/he not taken time out of the workforce. This would incentivise the carer to resume at least the same level of paid work as they had before leaving employment.
KPMG believes the Primary Carer rebate would help to equalise pay and superannuation for women who are currently losing out on super contributions after leaving work. These "timeout" losses particularly impact women in lower paid employment.
Alison Kitchen, Chairman of KPMG Australia commented that whilst there was a range of reasons that contribute to unequal superannuation retirement balances between men and women in Australia, one of the biggest factors was time out of the workforce to be the primary carer of young children. She noted low super balances as a particularly important issue, given women's greater life expectancy.
"Time spent out of employment is a major contributor to unequal levels of superannuation balances, as women miss out on super contributions in some of their peak working years. We propose the introduction of a targeted rebate of tax paid on contributions for primary carers as a mechanism to compensate for 'women's time out'. Without them, women will continue to miss out on vital income during childbearing years that can significantly impact on them later, especially in retirement,"she said.
Primary Carer Rebate on SCT
Linda Elkins, KPMG Partner and National Sector Leader Asset & Wealth Management said: "This approach could help close the gender super gap in a significant way. The aim is to support the primary carer in catching up to the extent of a maximum of 50 percent of the contributions that might reasonably have been made, had they continued to work as they did before leaving the workforce."
KPMG noted that there was a need to support women in lower income jobs.
Linda Elkins said: "Options that help primary carers make additional contributions in excess of the $27,500 cap will not greatly help a person on $60,000 a year. We believe a more targeted approach will prove more successful, and so our proposal is based on strict eligibility."
The individual would claim the rebate through their personal income tax return. The total $500,000 fund balance limit to be eligible for "catch up" concessional contributions would also apply.
KPMG makes three other suggestions in the report:
- the creation of a Primary Carer Supplementary Concessional Cap
- providing top-up super for primary carers
- removing the five-year limit on utilisation of concessional caps.
Gender Superannuation Gap
- The median superannuation balance for men aged 60-64 years is $204,107 whereas for women in the same age group it is $146,900, a gap of 28 percent.
- For the pre-retirement years of 55-59, the gender gap is 33 percent and in the peak earning years of 45-49 the gender gap is 35 percent.
Individuals with low superannuation balances are more likely to rely on the age pension in retirement. As at December 2020, 55 percent those collecting the full pension were women.
"Financial insecurity in retirement contributes to poverty and housing insecurity of older women in Australia," said Alison Kitchen. "Our broad commitment is to help change that situation for the better by working with stakeholders to support targeted policy reform."
