Stop penalising women for having children: HESTA
HESTA is once again calling for the Australian government to address gender inequities in superannuation and improve financial security for women.
In its pre-budget submission, the super fund said tracking and closing gender gaps remain its top priority.
Most HESTA members are low and middle-income working women and are therefore less likely to be able to save outside their super and are more likely to have lower account balances when they retire compared to their male counterparts.
HESTA stressed one way to close the gender super gap is for government to pay super as part of the Parental Leave Pay Scheme, thus addressing the motherhood penalty.
"Women suffer the consequences of reduced super when taking time off work to care for children," it explained.
"This is inequitable and disproportionally unfair."
Modelling by the fund highlights the positive impact of paying super to parents on leave.
It found an early childhood educator with three children could have as much as a 6.5% boost to their super savings while an aged care professional with two children could see her super get an additional 4.2% at retirement.
Meanwhile, a mother with two children who is working in the community services industry could retire with up to 7.1% more super if super was paid on the Parental Leave Pay Scheme.
"Women already suffer as their earnings reduce by 55% in the first five years of parenthood, further exacerbating the gender super gap and risking women's financial security in retirement," it said.
"This (adjustment) is potentially life changing for HESTA members on low and middle incomes."
It further added other key recommendations to reform superannuation settings are around tax concessions.
It explained due to super being taxed at 15%, lower income earners in the bottom brackets are hit harder on super than wages, while workers in the second lowest tax bracket received no tax benefit on their super.
It argued that the government's Low Income Super Tax Offset (LISTO) eligibility no longer supports lower income earners, who are most likely women, following 2017 increases in super guarantee and changes to the income tax brackets.
"A worker must earn less than the full-time minimum wage to be eligible for this tax concession, making the LISTO an equity measure that does not adequately compensate most of our lowest paid for the additional tax they have paid," it said.
"The current $500 cap equates to less than the tax paid on the 10.5% super contributions by individuals with incomes above $31,7465.
"Women between the ages of 18 and 54 are twice as likely to receive the offset as men, and LISTO payments peaking for women aged 25 to 33 as they return to the workforce from having and caring for children."
HESTA proposed two "simple" changes that address this misalignment.
"First, extend the LISTO eligibility to those earning up to the top of the second tax bracket, link the amount to the SG rate and introduce an additional annual payment equal to 15% of SG contributions for those who earn below the effective tax-free threshold," HESTA said.
HESTA explained the second recommended change is so that those individuals who earn up to the effective tax-free threshold get some benefits from the concessional treatment of super.
"Our modelling suggests that if the government adopts these changes, a 25-year-old HESTA member working in aged care could see their balance at retirement increase by 2.5% this is an additional $8854."
Around 250,000 HESTA members could also see increases to their super savings if the LISTO eligibility was extended.
In addition, HESTA said the government should also introduce and fund a "carer credit" to compensate parents for superannuation lost due to unpaid parental.
"Unpaid time out of the workforce to care for others has a significant impact on women's financial security in retirement," it said.
"Women perform 80% more unpaid work at home each week than men including child-care, caring for other family members, housework, shopping, and food preparation."
It added PwC previously estimated that the replacement cost of informal childcare alone would be $409.5 billion per year.
"This is an enormous contribution to society that is not properly recognised as essential to the economy, with the cost borne mostly by women," it said.
HESTA further added government should also cap the amount of superannuation balances to $5 million, where investment earnings exceeding this cap are taxed at the top personal income rate.
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