Superannuation is a long-term investment designed to provide Australian for their retirement. Super is one of the most tax effective ways of saving. Accrued funds saved in superannuation replace income in retirement. These funds will only be accessible in retirement, it can be withdrawn as a lump sum at age 65 or permanent retirement and upon reaching preservation age which ranges between 55 to 60 depending on the date of birth. Super can also be accessed in lump sum by temporary incapacity, permanent disablement, terminal illness, death or severe financial hardship. Another way to access superannuation is through non-commutable income stream upon preservation age. Superannuation is not only a good estate planning tool but also an effective way of accumulating wealth and generating income guaranteed to give Australian a dignified retirement.
A research conducted by the Australian Taxation Office shows that many employees over the age of 50 won’t retire with enough money to retire comfortably. The government are concerned that people will retire without savings and fall back on the state. Their goal is to give a better regulated, more flexible and competitive superannuation system to give Australians more choice on where they should invest their retirement funds. Contentious changes to the super funds are expected to achieve this objective.
Economists say the super tax system benefits the rich more and it needs to be overhauled. Superannuation policy has been proposed to be overhauled to promote fairness for women when they retire by closing the gender pay gap in super savings. The super gap is the difference between lifetime earnings of men and women. More than half of women between the ages of 25-29 retiring in 2055 will not have a comfortable level of retirement income. Women typically saved only half of the amount of super that a man would have in retirement. Women have their work patterns disrupted over the course of their working life. The multiple obstacles to women in accumulating super savings include lower overall pay, part-time work and maternity leave. Life events like pregnancy, giving birth, caring for the children and caring for ageing parents force women out of the work force. When they return, they fall behind on trying to build up their superannuation funds.
The average Australian women save around half of the amount of men, most of them retire in poverty with inadequate income to live on. The government wants to do something to overcome the hurdle s on women to accumulate enough super savings and close the gender gap on superannuation by overhauling the system. The move is aimed to reduce the gap in participation rates by 25% by 2025. The proposed overhaul will make the superannuation fairer for women by bolstering women’s retirement income and supporting their economic security.
The Government is set to adopt holistic policy approach on supporting women’s workforce and make the system fairer to women by assisting women to save for retirement. Industry Super proposed multiple ways to rebalance the system, it recommends policy changes including:
• A government-funded seeding payment on superannuation which will automatically go to low-income earners between the ages of 27-36 to replace the present voluntary government policy with low take-up rates.
• Rebalancing tax concessions. Tax on earnings above $50,000 a year and a reduction in the amount that can be contributed in super.
• Increase in the employer-funded super payments to be considered as paid wages.
• Allowing women to make large contributions to super on return to work after parental leave. Raising the contributions cap will allow working mothers to top up their super without getting extra tax.
• Improve the present scheme by having government-paid superannuation contribution during parental leave.
• Remove the $450 a month threshold below which employers don’t have to pay superannuation.