How can women bridge the superannuation gap?
One of the big challenges for the government and the superannuation industry is how to ensure women have the ability to build up balances over their lifetime for retirement, particularly as the gender gap between super balances has actually widened by 20% over the past few years*.
The proposals announced in the 2016 federal budget included a handful of new measures that, if legislated, are likely to have an impact particularly on women's super balances.
Low-income super tax offset (LISTO)
The LISTO will apply to low-income earners with adjusted taxable income up to $37,000 a year who have had a concessional contribution made on their behalf. The LISTO will provide a tax offset to the low-income earner's super fund based on the tax paid on concessional contributions made on their behalf, up to a maximum of $500 a year.
The LISTO will replace the current low-income superannuation contribution (LISC) when it ends on June 30, 2017.
This is a positive outcome for lower-paid individuals, many of whom are women. The budget papers state that the LISTO is expected to provide a benefit (of up to $500 a year) for over 3 million people, of whom around two-thirds are women.
Low-income spouse tax offset
The government also intends to increase access to the low-income spouse tax offset from July 1, 2017, by more than trebling the income threshold for the low-income spouse from $10,800pa to $37,000pa. The offset (as currently proposed) will continue to be set at 18% of the amount of eligible contributions and provide up to a maximum of $540pa for the contributing spouse.
As a result of this significant proposed increase to the current eligibility threshold, this measure is likely to open up the tax offset to more spouses on lower incomes and boost their retirement savings, particularly those of women.
Five-year rollover of unused concessional cap
If legislated, this measure will introduce a degree of flexibility as it will allow, from July 1, 2017, individuals who do not fully utilise their concessional contributions cap to make "catch-up" concessional contributions. This ability will be limited to those with super balances of less than $500,000, and the unused portion of the cap can only be carried forward for a maximum of five years from the 2017-18 financial year onwards.
This measure is a welcome step in increasing flexibility as it will allow individuals to make "catch-up" contributions to super and will be beneficial to women, migrants and others with broken work (and contribution) patterns, such as those who start a small business.
Full details of these proposals have not yet been announced. The government is expected to release further information in the coming weeks before the new parliament resumes.
Melinda Howes is General Manager for BT Financial Group.
*Association of Superannuation Funds Australia (ASFA) Research and Resource Centre paper, Superannuation balances by age and gender, December 2015
$100k calculation: approximation based on $3000 spouse contribution + $540 tax offset x 25 years is $88,500 plus interest over the period. The information contained in this article is an overview only and should not be considered a comprehensive statement on any matter nor relied upon as such. It contains general information only and does not take into account your personal objectives, financial situation or needs. You should seek personalised advice from a financial adviser and your accountant before making any financial decision in relation to super, tax or other matters discussed in this article. The information in this article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. Except where contrary to law, we intend by this notice to exclude liability for this information. Information current as at 26 July 2016. © BT Financial Group 2016.
The information contained in this video is an overview or summary only and should not be considered a comprehensive statement on any matter nor relied upon as such. It contains general information only and does not take into account your personal objectives, financial situation or needs. You should therefore consider whether information in this video is appropriate to you having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. As the rules associated with the super and tax regime are complex and subject to change and as the opportunities and effects differ based on your personal circumstances, you should seek personalised advice from a financial adviser and your accountant before making any financial decision in relation to super, tax or other matters discussed in this video. The information in this video may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. Except where contrary to law, we intend by this notice to exclude liability for this video.
Superannuation is a long-term investment. The government has placed restrictions on when you can access your preserved benefits. The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. In addition, the government has set a non-concessional contributions cap. Before requesting the rollover, you should also check with your other fund/s to see if there are any exit fees for moving your benefit, or other loss of benefits (e.g. insurance cover). For more detail, speak with a financial adviser or visit the ATO website. Your individual situation may differ and you should seek independent professional tax advice. Information current as at July 2016.