Superannuation is failing lower income earners

The gap between male and female superannuation savings have once again been labelled one of Australia’s greatest inequalities:

Almost three out of four “Millennial” women – those born between 1980 and 2000 – told a survey of 1000 people the super system was not designed to support women.

Only 25 per cent of women this age believe they will be able to retire comfortably, compared with 44 per cent of Millennial men…

Hobbs, an economist with a financial-services background who has worked for the United Nations as an expert on the financial inclusion of women, says the results of the survey should be a “clarion call for our federal politicians to elevate womens’ retirement outcomes to the forefront of the superannuation reform agenda”.

For those approaching retirement, aged 55 to 64, the median super balance for women in 2015-16 was $96,000, compared with $166,000 for men, Australian Bureau of Statistics figures say.

“The super system magnifies a lifetime of financial discrimination and inequality for women…

“The super system needs to take women more seriously,” Hawker says. She would like to see carer roles compensated in some way – perhaps with the payment of the superannuation guarantee on the Commonwealth parenting payment.

Hobbs says women continue to undertake the majority of unpaid care work and this includes domestic work and taking care of children, the elderly, or a family member with a long-term health condition or disability. When women are engaging in unpaid work, they do not earn superannuation.

Let’s get one thing straight. The inherent bias against women’s superannuation stems from the inequitable way that concessions are distributed, which disadvantages lower paid workers irrespective of gender.

Under current arrangements, superannuation contributions/earnings are taxed at a flat rate of 15%. Accordingly, those on lower incomes receive minimal concessions (or are penalised), whereas those on higher incomes receive the biggest tax concessions:

Division 293 remedies the situation for those very high income earners above $250,000. But even then, the lion’s share of superannuation concessions still flow to the highest income earners, whereas the lower income earners continue to be disadvantaged by the system, as shown in the next chart from the Grattan Institute:

Since women typically earn less then men – because they tend to work in lower paid professions (e.g. nursing and teaching), work part-time, or take time off from working to raise children – they accumulate much lower superannuation balances.

The first best solution to this problem is to reform the superannuation system to make concessions more equitable and sustainable.

In particular, the 15% flat tax on contributions/earnings should be replaced with a flat-rate refundable tax offset (e.g. 15%). This way, everyone that contributes to superannuation would receive the same concession, the system would be made progressive, and lower income earners – be they male or female – would get a better deal.

The 30-year old rule that stops earnings under $450 from an employer in a month from attracting superannuation should also be removed.

One thing we definitely do not want to see is band-aid solutions like raising the superannuation guarantee (compulsory super) from its current 9.5% to 12% without first reforming the way that contributions/earnings are taxed. All this would do is heighten inequities already present in the system. It would also rob lower paid workers (and women in particular) of much-needed disposable income and worsen the long-term sustainability of the Budget.

As an aside, the growing concerns over the disparity between male/female superannuation and earnings is largely a non-issue. We are family units whereby husbands/wives pool their financial resources – both incomes and savings – and share workloads, be it paid or domestic.

Moreover, when couples divorce, financial resources are split-up and distributed among the spouses, including superannuation savings.

Instead of fighting fake gender wars, policy makers should focus on eliminating poverty, irrespective of gender.

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  1. They should be married by that age anyway, so who cares? It forms a combined pool.

    If you’re single at that age, you have a whole lot of extra expenses coming your way, much greater than any difference in Super.

  2. The Horrible Scott Morrison MP

    There is no inequality in workplace compensation and there is no inequality in superannuation. There is complete and total equality of opportunity. Outcomes differ because of choices. Quit being a moaning lefty soy boy.

  3. Agree super concession should be progressive and is mostly just a lurk for higher income earners.

    Agree brining gender into the discussion is unhelpful. Pretty sure your partner can make a bunch of pre and post tax contributions into your super if earnings are lopsided between the two of you.

  4. “The inherent bias against women’s superannuation stems from the inequitable way that concessions are distributed, which disadvantages lower paid workers irrespective of gender.”

    Well said. No need to get sucked into the fake social justice vortex

  5. Even StevenMEMBER

    Agreed. It’s not a gender issue. And yes, change the superannuation settings to a fairer structure for low income earners.


    Let those below a certain income level and super balance ‘opt-out’ of the super system i.e. $75k and $100k, Good grief-paying a 15% contributions tax AND paying earnings 15% tax along the way is pure madness if the goal is to encourage / facilitate wealth accumulation. As it is, its just another tax on the unsuspecting who don’t get all the complexities. Most folks would be way better off having access for countless reasons (school fees, house DP’s, assorted this and that) and if a low operating cost retail (non-super) index fund or ETF was the investment vehicle it would grow faster and represent a larger account over time. That 15% contrib tax and taxation of earnings while in the super show is uniquely Australian and completely stupid.

  7. Ronin8317MEMBER

    Superannuation is designed to fail those in lower income. It exist as a tax dodge for the wealthy in exchange for them not claiming the government pension. Those on low income will spend their meagre superannuation total right after retirement, then go on the pension.

    When the government cuts down the pension for non baby-boomers, then this will all come falling down.