As discussed in chapter 2, the problem of economic insecurity for women
in retirement is starkly illustrated by the gender gap in superannuation
savings (hereafter the 'superannuation savings gap'), which currently stands at
46.6 per cent at the point of retirement. The size and persistence of
the superannuation savings gap is entirely inconsistent with basic Australian
principles of equity and fairness, and closing the gap is fundamental to
ensuring women have dignity and security in retirement.
This and the following chapter explore a range of superannuation policy
issues and suggest several policy changes that directly relate to the structure
and operation of the superannuation system. This chapter considers:
whether, as part of the current push to enshrine the purpose of
superannuation in legislation, explicit reference might be made to women's
the fairness and efficiency of the current distribution of
superannuation tax concessions, with specific reference to how the distribution
of those concessions affects women's retirement incomes, and possible reforms
in this regard;
policy proposals in relation to the compulsory superannuation
retaining the Low Income Superannuation Contribution (LISC);
accelerating the increase in the superannuation guarantee (SG)
rate to 12 per cent, and possibly increasing the SG rate higher
requiring that employers pay female employees a higher SG rate;
removing exemptions from the SG, including the exemption from the
requirement for employers to make SG payments to an employee earning less than
$450 in a given month; and
extending the SG to cover self-employed people; and
if several other structural and operational reforms might help
close the superannuation savings gap.
While the policy issues suggested in this chapter are important, the
committee reiterates the need to address underlying social, economic and
cultural biases that give rise to the retirement income gap. In particular, the
committee again notes the need to address the gender wage gap and gendered
workforce participation patterns. Without efforts to address underlying
structural biases, as discussed elsewhere in this report, the policy directions
suggested in this chapter can only make a difference at the margin. The
committee therefore suggests that the recommendations made in this chapter
regarding the superannuation system be read in conjunction with the broader
structural changes recommended elsewhere in this report.
The committee also emphasises the importance of considering
superannuation policy holistically alongside Age Pension policy. Issues
relating to the Age Pension are considered in chapter 8.
Summary of the superannuation savings gap
As noted in the terms of reference and discussed in chapter 2, the
average superannuation balance of women at retirement is about half that of
The superannuation savings gap is driven by a combination of interrelated
factors, all of which have been explored in previous chapters, including:
women's lower workforce participation rate and disproportionate
representation in part-time and casual employment;
occupational and industrial segregation;
the gender pay gap;
pregnancy related workplace discrimination; and
the disproportionate amount of unpaid caring work undertaken by
There was a general recognition by inquiry participants that these
underlying factors would need to be addressed to close the superannuation
savings gap. The Australian Institute of Family Studies (AIFS), for instance,
made the point that the superannuation savings gap is primarily a result of the
gender wage gap, women taking longer periods out of paid employment, and the higher
incidence of part-time work by women. The AIFS argued that as long as any of
these three trends persist and superannuation contributions continue to be
based on earnings, the superannuation savings gap will remain.
At the same time, many inquiry participants, even while acknowledging
the need to address broader structural biases, also discussed how the current
structure and operation of the superannuation system reinforced the gender
retirement savings gap, and outlined areas for possible reform. The ideas put
forward by participants in this regard are considered below and in the next
Defining the objective of superannuation
Currently, the objective of the superannuation system is not set out in
legislation, but is generally understood to be to provide income in retirement
to substitute or supplement the Age Pension. The Financial System Inquiry (FSI)
report recommended that the government:
Seek broad political agreement for, and enshrine in
legislation, the objectives of the superannuation system and report publicly on
how policy proposals are consistent with achieving these objectives over the
In its response to the FSI report, released on
20 October 2015, the government agreed to the FSI's recommendation
that the objective of the superannuation system should be enshrined in legislation.
The government also advised that it planned to develop and introduce
legislation to this end by the end of 2016.
On 9 March 2016, the Assistant Treasurer, the Hon Kelly O'Dwyer MP,
released a discussion paper on the issue to start a public consultation process,
and called for written submissions.
Some inquiry participants submitted that the stated objective of the
superannuation system and the measures by which the objective is assessed
should include references to gender. For example, the AIST reasoned:
Both transparent objectives for the superannuation system and
agreed KPIs should include a gender lens—recognising the needs of women—as well
as a methodology for assessing the impact of both current and proposed policies
through a gender lens.
Mrs Buckley, Women in Super, spoke firmly in favour of enshrining the
objective for the superannuation system in legislation. Asked if this objective
should include specific reference to women, Mrs Buckley responded:
Yes, definitely. In every submission that we have done,
including our submission to the FSI, we would have stated that we believe that
any policy measure, whether that is tax or otherwise, should have a gender
analysis. It is something that the EU has mandated as compulsory.
While compulsory superannuation has significantly expanded access to
superannuation for women, the superannuation framework does not easily
accommodate women's experience of work. Future changes to the structure and
operation of the superannuation system should be examined with specific
reference to the impact on women's retirement incomes. For this reason, the
committee believes that the stated objective of the superannuation system
should include a specific reference to women's retirement incomes. Doing so
will underline the importance of closing the gender superannuation gap, and
help ensure that focus on the issue is maintained in the policymaking process
in the years ahead.
Furthermore, arising from the earlier discussion of the integrated
nature of Australia's retirement system, the committee considers that any
objective for superannuation should acknowledge its interdependency with the
other pillars, including the age pension (see chapter 8).
The committee recommends that the Australian Government set an objective
for superannuation that supports the continuation of a strong three pillar
retirement income system.
In drafting this objective for the superannuation system, the Australian
Government should include specific reference to women's retirement incomes, to
ensure gender equity is a continuing focus for policy makers.
Taxation of superannuation
A wide range of participants in the inquiry contended that current
superannuation tax concessions are poorly targeted and serve to reinforce the
gender retirement savings gap.
The committee heard that the inequitable distribution of tax concessions on
superannuation contributions and earnings not only favours high income earners
and high wealth households generally, but also disproportionately disadvantages
For example, the National Foundation for Australian Women suggested that
the superannuation system was not currently 'fit for purpose', with tax
concessions overly generous and misdirected. The winners in this system were
generally higher income men, whereas women on low-incomes or reliant on the Age
Pension lose out.
Similarly, ISA argued that:
...tax concessions on super operate in a regressive way, so
that very significant benefit is derived at the top end—mainly male
income-earners. Yet at the bottom end, where there is a great concentration of
female workers, in fact there is a tax penalty for super contributions.
ISA highlighted both the general inequity in the distribution of
superannuation tax concessions and the gendered dimension of this inequity.
According to ISA, of an estimated $30 billion in revenue foregone each
year due to superannuation tax concessions, 35 per cent flowed to the
top 10 per cent of income earners, whereas only 29 per cent
flowed to the bottom 70 per cent. Moreover, ISA estimated that only
33 per cent of superannuation tax concessions went to women, meaning
men receive about double the support through the tax system as women to build
their superannuation balances.
ISA proposed a package of tax reforms to improve the efficiency and fairness of
the superannuation system:
Superannuation contributions tax reform: Taxing superannuation
contributions at marginal rates, with a 25 per cent offset on the
gross contribution, capped at $7,500 and paid to the superannuation fund.
Contributions cap: A cap of $50,000 per year, with additional
'catch up' contributions allowed in limited circumstances (the concept of
'catch up' contributions is discussed in the next chapter).
Superannuation earnings tax reform: Accumulation and retirement
earnings taxed at 15 per cent, with all tax rebated for earnings
below $50,000 per year in the retirement phase.
Similarly, the ACTU argued that superannuation tax concessions originally
designed to encourage people to save for their retirement were instead being
used by high income earners to minimise their tax. To provide for greater
equity in the superannuation system, the ACTU recommended progressive taxation
of superannuation contributions, based on a taxpayer's marginal rate minus a
rebate. It argued:
Addressing the inequitable nature of current tax settings
will improve women's retirement incomes, particularly for those on lower-incomes
and increase incentives for women to contribute to their retirement savings by
putting money into superannuation. It will also help generate revenues to help
maintain the value of entitlements like the Age Pension that support women in
Rice Warner also set out some options for reforming the taxation of
superannuation, with the intent of making the system fairer and simpler:
The tax system is inequitable in its treatment of
superannuation. In our submission to the tax white paper task force we suggest
that a 20 per cent rebate be applied in personal tax returns for all
concessional contributions made. This will be more beneficial than maintaining
the LISC proposal, which is favoured by many in the superannuation industry
We have also suggested a tax on fund earnings of 12 per cent
for the accumulation and pension phases. It has a number of advantages. Set at
that level, it would raise an extra $400 million of revenue in the first year,
which could be diverted to fund some of the other solutions we and others have
The Grattan Institute reiterated recommendations made in its recent
report on superannuation taxation reform, Super tax targeting. These
recommendations included limiting pre-tax concessional contributions to $11,000
per year, capping lifetime contributions from post-tax income to $250,000, and
taxing superannuation earnings in retirement at 15 per cent. It
contended that current superannuation tax concessions:
...provide the greatest boost to high-income earners that don't
need them. Most of these high-income earners are men. Better targeting of super
tax breaks could free up revenue to provide more targeted support for
retirement incomes for those that need it most, and to reduce marginal
effective tax rates for low- and middle-income earners to encourage greater
female workforce participation.
A large number of other submissions and witnesses also called for
reforms to current superannuation taxation arrangements. While recommendations in
this respect varied, there was broad agreement that greater equity in the
distribution of superannuation tax concessions would help address the superannuation
The committee agrees with the view put by many inquiry participants that
superannuation tax concessions should be targeted at those most in need. The
committee acknowledges that gender is only one aspect of the broader issue of
the equity and efficiency of superannuation tax concessions. However, because
women are overrepresented in lower-income, lower-wealth cohorts, the committee
considers that a fairer distribution of superannuation tax concessions, in
which the benefit of those concessions is more evenly shared across the labour
force, would help address the gender retirement savings gap.
It is the committee's view that the distribution of superannuation tax
concessions should be fair, efficient and effective. Current superannuation
taxation arrangements compound rather than ameliorate the superannuation
savings gap. The committee considers that superannuation tax concessions should
be better targeted to facilitate improved outcomes for women in retirement.
The committee recommends that superannuation tax concessions be
re-targeted to ensure that they are more equitably distributed and assist
people with lower superannuation balances to achieve a more comfortable
Low Income Superannuation
The LISC is a government superannuation payment of up to $500 made to
the accounts of people earning $37,000 or less per year.
Individuals earning less than $37,000 per year would pay no income tax on the
first $18,200 of their income, and 19 per cent tax on the next $18,800 of
income, up to the $37,000 threshold. The LISC addressed the flaw in the
superannuation system where the 15 per cent contributions tax paid by
individuals on their superannuation contributions is higher than the rate of
tax if that money were paid as income.
In effect, it provides for a refund to the superannuation accounts of
low-income earners of the 15 per cent tax paid on concessional
superannuation contributions. The LISC is intended to ensure that low income
earners' superannuation contributions are not taxed at a higher rate than their
take home pay.
Without the LISC, as ISA explained, low income workers would effectively pay a
'tax penalty' on their 'concessional' contributions:
The tax penalty works because tax on super contributions is
taxed at 15 per cent, and the tax that applies on contributions is
higher than the tax that applies to people's take-home pay. So it is about the
interaction between the tax-free threshold and the first tax bracket with the
contributions. The low-income super contribution was a measure that was
designed to return that differential between super tax and your marginal tax
The LISC was repealed by Schedule 7 of the Minerals Resource Rent Tax
Repeal and Other Measures Act 2014, and will no longer be available after 30 June 2017.
Many inquiry participants argued that the abolition of the LISC was a
retrograde step that would make the tax treatment of superannuation
contributions even more regressive than is currently the case.
Women are statistically more likely than men to benefit from the LISC.
The Australia Institute observed that while women constituted
45 per cent of all taxpayers, they made up 57 per cent of
those who received the LISC.
Similarly, Mercer advised the committee that of the 3.6 million
Australians who benefited from the LISC, 2.2 million are women.
Underlining the importance of the LISC for women's superannuation balances, ISA
noted that approximately one in two working women receive a benefit from it.
The evidence received during the inquiry was overwhelmingly in favour of
retaining the LISC beyond 30 June 2017, or otherwise ensuring that lower-income
earners did not pay more tax on their superannuation contributions than on
their ordinary income.
For example, BT Financial Group submitted that the LISC helped level the
playing field for lower income earners, thus helping generate 'fairer outcomes
for the community, and better retirement outcomes for more Australians.' 
ISA described retaining the LISC as a 'policy no-brainer', given the 'very significant impact' the measure had on those who receive it.
Women in Super also reported that the major outcome of the Women's Super Summit
held in February 2014 was agreement on the need to fight to retain the LISC.
HESTA told the committee that the LISC was the 'difference between a
fair system and an unfair system for those earning under $37,000'. HESTA sought
to provide the committee with some insight into what its removal would mean for
many of HESTA's members, and used the example of a hypothetical 42-year-old female
nurse to demonstrate its point. It explained that since the LISC was introduced
it has contributed approximately $139 million to members' accounts that they
would not have otherwise received:
So what does that mean to our 42-year-old nurse? Using
some—as one of my colleagues said—bush modelling, we can pretty much determine
that. For our 42-year-old nurse with around $17,000 in her superannuation
account at the moment and a retiring age of 67, this means an extra $20,000 to
her in retirement. If we go back to that definition of dignity in retirement
and superannuation as a top-up, that is an incredibly large amount.
Similarly, REST referred to the importance of LISC for its members,
...25 per cent of our current REST members have received a LISC
over the last 12 months. Female members are 35 per cent more likely to receive
LISC than their male counterparts. That translates in our circumstances to over
350,000 members receiving a LISC in one year, with almost $100 million
being put towards their retirement savings. When you think about the
compounding effect of that, that makes a big difference.
AustralianSuper explained that the efficacy of the LISC was a function
of its automatic payment through the tax system:
This is a highly effective policy in addressing the economic
inequities of women and others on low incomes, because there is no need for
individual action: it is effected automatically through the taxation system. It
has a 100 per cent success rate, a 100 per cent take-up.
All women on low incomes directly benefit from this policy.
ASFA also argued that the LISC was an effective means of redressing the
inherent inequity in the taxation of superannuation contributions of
lower-income earners. It conceded that retaining the LISC would have an
immediate budgetary cost, but submitted that it would help reduce government
expenditure over the long term:
We think it would cost the budget, on current numbers, around
$1 billion. Whilst this is not insignificant, we do know that it would boost
balances by about 20 per cent. When you look at the savings in the long term in
terms of age pension and other social benefits, like many measures in
superannuation as the system matures and the ability to reduce government
expenditure, particularly on age pension which is about $7 billion a year, a
lot of these measures will become self-funding.
The Australian Human Rights Commission stated that retaining the LISC
was 'a question of equity', noting that 'it is not fair to tax concessional
superannuation contributions at a rate higher than that of [a taxpayer's]
Ms Susan Ryan AO, Age and Disability Discrimination Commissioner, acknowledged
that the LISC carried a cost to government, but maintained:
...the long-term benefits of having more women, in this case,
able to support themselves in retirement or draw a lesser age pension has to be
a good trade-off...
Some witnesses, while supportive of retaining the LISC, suggested
that the objectives of the policy might also be achieved by alternative means.
For example, the Financial Services Council noted that a 20 per cent
rebate on marginal tax rates for concessional contributions (as opposed to a
flat 15 per cent for all taxpayers earning below $300,000 a year),
would leave lower-income and middle-income earners better off than they would
be under the LISC.
Rice Warner made a similar point in its submission.
The committee concurs with the overwhelming view of participants in the
inquiry that the LISC should be retained beyond June 2017. The LISC is not a 'handout'
to lower-income earners, but a mechanism to ensure lower-income earners do not
pay more tax on their compulsory superannuation contributions than they pay on
their income. Retaining the LISC is a basic issue of equity. Conversely,
repealing the LISC would be a retrograde step, and would be particularly
damaging for the more than 2 million women who receive a benefit from it.
The committee notes that certain reforms to superannuation tax
concessions that are currently being discussed by some commentators might mean
the LISC is no longer required. In particular, suggestions that concessional
contributions might be taxed on the basis of a person's marginal tax rate minus
a discount might remove the need for the LISC. Absent such reforms, the
committee maintains that the retention of the LISC is critical.
The committee recommends that the concessional superannuation
contributions of lower income earners are not taxed at a higher rate than their
ordinary income, and that the Australian Government commit to retaining the Low
Income Superannuation Contribution beyond 30 June 2017.
Increasing the Superannuation
Guarantee (SG) rate
The Superannuation Guarantee (SG) rate is the minimum percentage of an
employee's earnings that an employer must pay to a complying superannuation
fund or retirement savings account. The SG rate is currently 9.5 per cent.
The majority view of submitters and witnesses appearing before the committee
was that delivering economic security for women in retirement required a higher
SG rate. While the SG rate is currently scheduled to rise gradually to
12 per cent by July 2025, the next increase in this process (from 9.5
to 10 per cent) is not due to occur until July 2021. As explained
below, many witnesses and submitters contended that the increases should
commence without delay.
In March 2012, the former Labor government legislated a gradual increase
in the SG rate, starting with an increase from 9 to 9.25 per cent in July
2013, and rising to 12 per cent by July 2019. Prior to the 2013
Federal Election, the then Opposition Leader, the Hon Tony Abbott MP, announced
that a Coalition government would freeze the SG rate at 9.25 per cent
for two years, thereby delaying the increase to 12 per cent until
July 2021. (However, the SG rate increased from 9.25 per cent to
9.5 per cent in July 2014, as previously legislated.) In the 2014–15
Budget, the government announced that the current SG rate would be frozen until
July 2021, and the eventual increase in the SG rate to 12 per cent
would be delayed until July 2025, six years later than originally planned. The
rephasing of SG increases was given effect by the Minerals Resource Rent Tax
Repeal and Other Measures Act 2014.
The evidence received by the committee revealed a broadly shared view
from a range of organisations and individuals of the importance of a
12 per cent SG rate in addressing low levels of superannuation savings,
especially for women. For example, BT Financial Group argued that increasing
the SG rate to 12 per cent would be 'one of the single biggest
contributors to improving retirement savings adequacy', and urged that the
increase occur as soon as possible.
Asked about the pause in the SG rate increase, Women in Super also
suggested that the increase should occur as soon as possible. Mrs Buckley
explained that a 12 per cent SG 'would definitely help women in
achieving some form of balance'.
AustralianSuper told the committee that without an increase of the SG
rate to 12 per cent, the 'objective of funding adequate retirement
incomes simply will not be met'.
While acknowledging the cost to employers of a higher SG rate, AustralianSuper
...the longer the delay in the rise of the superannuation
guarantee, another generation of women will potentially face economic
insecurity at retirement as a direct result of inadequate retirement savings.
The FSC pointed to research undertaken by Rice Warner which showed the
pause in the SG rate at 9.5 per cent had:
...resulted in a $136 billion blow-out in the retirement
savings gap. That is the gap between the amount that people will accumulate by
retirement and the amount they require—that is, the gap between what we have
and what we actually need.
The FSC acknowledged that even a 12 per cent SG rate would
leave many women (and many low and middle income earners generally) with
insufficient superannuation to fund their own retirement. However, the FSC also
suggested that an important measure of the superannuation system's success was
the number of people who were able to move from the full pension to the
part-pension, or even off the part-pension completely, and a 12 per cent
SG rate was critical to progress in this regard.
A large number of other submitters and witnesses argued that
accelerating the increase in the SG rate to 12 per cent would have an
important and positive impact on the retirement savings of millions of women.
Some submitters went further still, arguing that even a 12 per cent SG
rate would leave too many women with inadequate retirement savings given the
persistent gender wage gap and gendered workforce participation patterns. For
example, REST argued for the SG rate to increase to 15 per cent by
2027, and COTA also recommended an eventual SG rate of 15 per cent.
In contrast to the evidence discussed above, AI Group submitted that
raising the SG rate had a number of disadvantages. These disadvantages,
according to AI Group, would include increases in the disparities in
superannuation balances to the relative disadvantage of lower-income earners;
higher costs on the Budget; and opposition from employers, who would consider
the higher SG rate an additional cost.
AI Group added that it disagreed that increasing the SG rate to
12 per cent would assist in closing the gender retirement gap,
contending that the measure 'would in fact widen the gap between the retirement
incomes of men and women'.
While not criticising the 12 per cent SG target specifically,
the Grattan Institute sounded a general note of caution on increasing the SG
rate. It contended that the benefits of increasing the SG rate:
...must be weighed carefully against their costs, especially
any falls in the living standards of working age households. Retirement
incomes, measured as a replacement rate relative to pre-retirement incomes,
already exceed 100 per cent for many low-income earners.
Dr Hodgson from National Foundation for Australian Women noted that with
wage growth currently flat, it was likely extra SG contributions would be
coming from the take-home pay of low income workers. This risked undermining
'their ability to meet their day-to-day needs and to make savings'. Dr Hodgson
noted that while some unions tend to think of superannuation as an 'add-on to
wages', employers see it as part of the total wages bill. She argued that, in
practice, employers 'are not going to wear an extra half a percent in
superannuation costs added to their wages bundle. It has to come out of the
overall wages cost of the business'.
The clear message given to the committee during the inquiry was that the
current SG rate is too low. The increase in the SG rate to
12 per cent is a critically important reform, and one that will be
particularly beneficial in helping women build adequate savings for retirement.
The committee shares the concern of many inquiry participants that the
government's delay in increasing the SG rate will have a significant
detrimental effect on the superannuation balances of many women.
The committee recommends that the Australian Government revise the
current schedule for the increase in the superannuation guarantee (SG) rate to
12 per cent, and ensure the gradual increase in the SG rate is
implemented earlier than the current timetable.
Should a higher SG rate apply for
With regard to the SG rate, some organisations argued that employers
should be required to make higher SG payments for their female employees.
Others countered that a female-specific SG rate was too blunt an instrument, and
might also have unintended consequences.
Arguing the case for a mandatory 2 per cent boost to the SG
rate for female employees (on top of a 12 per cent SG rate), the ACTU
explained that the proposal was based on the continued persistence of the
gender pay gap over many decades. Until the pay gap was closed, it argued, the
higher SG rate would provide a means of helping to equalise the amount of money
women received in retirement.
Ms Kearney told the committee:
We recognise that there is an argument to say we should not
really align things along gender lines, and I do understand those arguments.
But unfortunately the barriers for the pay inequity are so entrenched and so
long term to overcome that this is something that could fill that gap.
Women in Super argued that measures to benefit women's retirement
incomes 'should be system based, compulsory and measureable, not employer or
individual based or voluntary'.
Women in Super applauded companies that had, in the absence of a mandatory
higher SG rate for women, voluntarily introduced higher superannuation
contributions for female employees. However, Mrs Buckley was concerned that:
...you are creating a group of employees who have access to
that extra two per cent and a group who will never have access to it. The
feeling within our policy group was we want to get away from a system that
benefits one group but not another.
The idea of mandating a higher SG rate for women was criticised by a
number of witnesses. For example, PwC explained that while it was supportive of
companies pursuing their own voluntary initiatives to pay women more
superannuation than men, it did not support a mandatory higher SG rate for
We feel that, for two reasons, there can be unintended
consequences if you make it more costly to employ females. We would be very
scared about those unintended consequences of employers not employing them, or
just reducing their cash salary to compensate. This issue is a broader issue
about lower income people and people who are in and out of the traditional paid
workforce. You need to fix the issue for them, not just focus on females.
Increasing SG to 12 per cent for everyone eventually would be great, but paying
females more, we felt, would have very poor unintended consequences.
PwC suggested that if a higher SG rate for women was compulsory, there
would be a particularly high risk of negative unintended consequences for women's
employment prospects with smaller businesses:
If you think about the number of people that are employed by
small businesses, whilst some of the big companies are actually introducing
some great policies, we certainly think that in the small business area it is
less likely that they will be as generous and the negative consequences of some
of those initiatives might actually be more harmful to women than benefit them
in the long run.
PwC told the committee that policy should address the underlying structural
drivers of the retirement savings gap, and these drivers were not specific to
Our approach is to consider the structuralist issues that
would disadvantage anyone who is on a lower income or who would have a period
of time out of a paid or traditional workforce. We have not structured it into
a female-versus-male debate because, as we see it, you need to fix the
structural problems. Those sorts of problems do not just affect females,
although females are probably overrepresented in the group. They also affect
Indigenous people and other lower income people and, increasingly and possibly
in the future, they might affect men who choose to have periods of time out of
the workforce for child rearing or elder care.
Ms Pauline Vamos, speaking to ASFA's proposal for employers to pay a
higher SG rate for women before or immediately after they go on maternity
leave, also argued that such schemes should not be mandatory. 'The last thing
we want', Ms Vamos said, 'is employers to shy away from employing women because
there is an extra cost'.
Ms Vamos's colleague, Ms Fiona Galbraith, added that if a mandatory higher
SG rate for female employees created new barriers to female employment,
particularly in small businesses, that would be:
...the worst outcome—if it were to end up in discrimination at
the point of not being employed in the first place because you are a female and
you are going to cost the employer more. Unfortunately, much and all as we
support Women in Super's position of trying to make it as equitable across
people as possible, the reality is that a measure like that is probably only
going to be something that larger employers will be in a position to do.
Asked to respond to arguments that a higher SG rate for women might
undermine the willingness of employers to hire women, the ACTU suggested
similar arguments were often raised in discussions about wages. This was the
case, it suggested:
...whether we are talking about pay rises, whether we are
talking about penalty rates, whether we are talking about raising the minimum
wage. There is always an argument that there will be a reduction in employment
rates. The fact of the matter is: none of those factors really have been shown
to do that. I think the economic benefits would far outweigh any of those arguments.
Having economic stability for women means that they have a more secure
retirement, that they can contribute to the economy, that they are less reliant
on welfare, that their health would be better and that they would be more
productive. I think the arguments for it far outweigh the arguments that say
that there would be an impact on employment, and I do not believe there is any
evidence to show that that is the case.
The committee welcomes initiatives by companies to introduce higher SG
rates for female employees (as discussed in the next chapter). However, the
committee is wary of making higher SG rates for women mandatory, as it
considers there are better, more targeted ways to narrow the gender retirement
Removing exemptions from the SG
Under subsection 27(2) of the Superannuation Guarantee
(Administration) Act 1992 (SGA), if an employee's monthly wages are less
than $450 per month, their employer is not liable to make SG payments to that
employee. If an employee is under 18 years of age or is a private or domestic
worker, such as a nanny, they must also work for 30 or more hours per week to
qualify for the SG.
Evidently, the $450 threshold was originally introduced because of the
administrative burden to employers of administering small amounts of
superannuation. The view put to the committee by ISA and others was that this
rationale was no longer valid, given technological changes and systems
innovation since the requirement was introduced—including the recent
introduction of the SuperStream standard for processing superannuation data and
The committee heard that the $450 threshold exemption had an especially
detrimental effect on women in part-time or casual work, and this was of particular
concern given the growing casualisation of the workforce. Women in Super
There are a number of women who work part-time, casual jobs,
who might have two or three jobs, none of which actually gets them to the $450
monthly threshold. So they end up, perhaps, earning more than that but with no
super as a result, because no one employer is obliged to pay their
ASFA also expressed concerns about the effect of the $450 threshold on
the superannuation balances of the growing number of casual and part-time
workers, including people in multiple jobs.
ASFA estimated that around 250,000 individuals, the majority of them women,
would likely benefit from the removal of the threshold through higher
retirement savings. Assuming that the 250,000 persons missing out on
superannuation contributions because of the $450 per month threshold have
average relevant wages of $3,000 a year, ASFA estimated that:
...the total wages bill for them would be $750 million per
annum. Superannuation payments at the rate of 9.5 per cent would amount to some
$70 million a year. This compares to a total wages bill for the economy of
around $600 billion a year.
The impact on the Commonwealth Budget would be negligible as
most of the individuals benefiting from removal of the threshold would be on a
zero or 15 per cent marginal personal tax rate. There could be increased
expenditure on the low-income earners superannuation tax rebate but we estimate
it would be less than $5 million a year.
AustralianSuper also outlined its concerns with the $450 threshold
exemption, and explained why it believed it should be removed:
The $450 per month threshold is an outdated policy. It is 23
years old. It uses an arbitrary threshold. It equates to $5,400 per year, which
was the income-tax-free threshold when the superannuation guarantee legislation
was first introduced. The tax-free threshold is now $18,200 per year. The
nature of the workforce has changed since then, as well. It is estimated that
35 per cent of Australia's workforce now work on a casual basis. The $450 per
month threshold excludes the large number of workers who are subject to the
casualisation of the workforce. An ASFA review of a HILDA study indicated that
the majority of workers earning less than $5,400 per year are women, younger
and older workers. There is an argument that paying superannuation to those
earning less than $450 per month is an administrative cost and burden on
employers. However, we think that the cogency of this argument has diminished, because
there are now significantly reduced administration costs from automation, from
electronic funds transfer and SuperStream reforms as well.
The Australian Nursing and Midwifery Federation noted that many of its
members in aged care often worked sporadic hours for multiple employers,
particularly in rural and regional settings where shifts were sometimes hard to
As a result, these workers often failed to clear the $450 a month threshold
with any single employer:
...[I]n all of the industries that we represent, it is endemic
that our members have part-time, temporary employment. They may be guaranteed
two shifts a week—so, 16 hours a week—and they may pick up another shift, but
there is no guarantee. So their certainty of earnings is very precarious, and
that is why it is often the case that they either work in other health
facilities or in other industries to try to supplement their income. But we
cannot work out the rationale for the $450 a month threshold. We do not think
it works effectively. And it certainly does not work effectively in the
industries where we have an interest.
The clear consensus in submissions that addressed the issue was that the
$450 threshold should be removed.
Other submissions also argued that the exemption for those under
18 working less than 30 hours a week should also be removed.
Asked if the introduction of SuperStream would make it easier for
employers to make payments to employees earning less than
$450 per month, the ATO confirmed this was likely correct:
At the moment, we have just finished implementing for large
and medium business and we are now in the middle of the small business
implementation. Once that system is in place and all small businesses are using
a SuperStream solution, there is a much easier and more efficient method of
meeting their SG obligations, whether it is through a clearing house or their
payroll software. In fact, it does simplify it quite considerably into single
payment and single data stream. To your point—does it reduce some of the complexity—yes,
The committee considers the $450 threshold exemption outdated,
unnecessary and ultimately detrimental to the interests of casual and part-time
workers, of whom a large proportion are women. The committee is satisfied that
removing the exemption would not impose an undue administrative burden on
employers, particularly in light of the recent introduction of the SuperStream
standard. Removing the exemption will go some way toward improving the economic
security of women in retirement. The impact in this respect may be modest in
terms of the overall value of superannuation balances, but the committee notes
that even small amounts can make a big difference to the dignity and economic
security of people in retirement. Besides, simply on the grounds of fairness,
people earning less than $450 a month deserve equal treatment to those earning
The committee recommends that the Australian Government amend the Superannuation
Guarantee (Administration) Act 1992 to remove the exemption from paying the
superannuation guarantee in respect of employees whose salary or wages are less
than $450 in a calendar month.
Compulsory superannuation for the
People who are self-employed, either as a sole trader or in a
partnership, are not required to make SG payments to themselves.
The absence of a requirement to make superannuation contributions means a
significant proportion of self-employed people make insufficient or no
contributions to their superannuation. This was a cause for concern for some
witnesses and submitters, who noted that this issue affected an increasing
number of women.
Women in Super noted that many small business owners commonly take the
view that 'my business is my super'. Often, however, businesses were not of
sufficient value to provide self-employed people with economic security in
Other witnesses also noted the high risk to self-employed people of relying on
the value of their business to provide for their retirement, tends to concentrate
risk in a single asset.
Women in Super suggested that the solution to this problem was to increase
awareness among the self-employed of the value of superannuation:
It could be through the ATO when they do their tax return,
including a booklet on superannuation to say, 'Yes, it's not compulsory but you
might want to look at it.' There is a lot of work that needs to be done in that
area. It is a growing number of women, which is obviously concerning from our
ASFA expressed similar concerns about the prevalence of self-employed
people without any superannuation, a cohort which includes a large number of
women. It noted that nearly 10 per cent of people working today are
self-employed and about 29 per cent of them have no superannuation.
ASFA also noted that around 25 per cent of the self-employed are
actually dependent contractors, 'in that they have working arrangements similar
to employees and are not conducting a business as such'.
ASFA added that:
...the fact that the superannuation guarantee is not payable
with respect to the self-employed is a distinction within the SG regime that,
at best, is a source of confusion and, at worst, is exploited by the artificial
creation of arrangements whereby individuals are considered to be self-employed
to avoid the need to pay SG.
ASFA recommended that the self-employed should be subject to compulsory
superannuation. ASFA acknowledged this might present some 'design
challenges'—for instance, in terms of the concept of 'income' against which
superannuation should be paid—but maintained these challenges should not
preclude work being undertaken in this respect. It submitted:
Consideration could be given to introducing a scheme similar
to the Medicare surcharge, whereby a surcharge amount is payable unless a
minimum amount of taxable income is contributed to superannuation. Utilising a
concept of taxable income would ameliorate concerns with respect to potential
adverse effects on the cash flow of start-up enterprises.
However, the SMSF Association expressed some caution about extending the
mandatory SG to cover the self-employed, suggesting that 'businesses probably
need the flexibility to be able to decide on how they contribute to super'.
Business owners will commonly want to invest their income back into their
business to provide it with working capital and help it grow, particularly in
the early years. The SMSF Association added that the majority of people who are
self-employed or small business owners already contribute to their superannuation
on a voluntary basis:
You will find even people that are self-employed might be
taking a wage and therefore having a compulsory super payment paid through.
There are a lot of small business owners, for instance, that are employed as
well. So we would not be encouraging at all the concept of mandating SG for a
self-employed person, because the system is actually working very well when it
comes to the SMSF sector. As an example, women account for 47 per cent of the
SMSF sector, and it is an area that has been shown to be active in their
contributions on a regular basis.
The committee reserves judgement on the merits of mandatory
superannuation contributions for self-employed people. However, the committee
notes that any proposed reforms in this regard would need to consider carefully
how a requirement for self-employed people to make superannuation contributions
might affect their ability to build their businesses. At the same time, the
committee encourages all self-employed workers, and in particular self-employed
women, to consider the need to make superannuation contributions to ensure they
have enough money to live on when they retire. The committee would also welcome
any government initiatives that actively encourage self-employed women to think
about their economic security in retirement and consider making superannuation
Other proposed structural changes to the superannuation system
Contributions by a working spouse
Currently, a person can receive an 18 per cent tax offset on
super contributions up to $3,000 made on behalf of a non-working or
low-income-earning spouse (thus, to a maximum offset value of $540).
A person can also have up to 85 per cent of their own concessional
super contributions from the previous financial year put into their spouse's
superannuation account, providing their spouse is under 65 years of age
and not retired. Split contributions count towards the contributing spouses
concessional cap, and are taxed at the concessional rate.
Some inquiry participants suggested improving incentives for a working
spouse to contribute to the superannuation account of a spouse with caring
responsibilities in a tax effective manner. For example, PwC Australia
suggested increasing the quantum of the tax offset available under the Spouse
Super Contribution for people that make contributions to a super or retirement
account on behalf of their spouse who is earning a low income or not working. PwC
Australia argued that this was a useful mechanism for women who take career
breaks, but have a partner that still works, to continue to build their
The Women Lawyers' Association SA submitted that taxation arrangements
for spousal contributions and contribution splitting did not provide an adequate
incentive for couples to:
...take steps themselves to try to equalise the inequity in
superannuation balances that results from the traditional division of labour
where a couple has children and one parent acts as breadwinner while the other
undertakes the majority of the child care.
The committee notes that it only received a small amount of evidence
addressing the issue of spouse superannuation contributions. With this
qualification, the committee suggests more generous arrangements in relation to
spouse contributions would likely only benefit a small number of higher income
earners. As such, while the idea may be worthy of further consideration in the
context of a broader review of retirement incomes, the committee does consider
the issue a high priority for reform.
Joint superannuation for couples
There were mixed responses from inquiry participants to proposals to
allow couples to create joint superannuation accounts. Those in favour of joint
accounts argued that they could improve retirement incomes for women by
reducing fee costs.
For example, Rice Warner noted that 450,000 couples with SMSF arrangements
already held joint accounts, and in other respects most Australian families
pool their finances. It acknowledged that the effect of the reduction in fees
(and the corresponding increase in superannuation balances) would be modest,
but suggested that 'joint accounts will produce higher levels of engagement and
therefore encourage more people to save for retirement'.
ANZ also suggested that joint accounts might help promote greater
engagement by households with their superannuation. Moreover, in the event of a
separation or divorce, the division of superannuation assets might be
Mrs Pauline Taylor also argued in favour of joint of family
superannuation accounts, suggesting superannuation funds could be shared more
equitably and fund balances would benefit from lower fees.
The alternative view was that joint accounts would not provide any real
assistance in reducing the gender retirement savings gap.
Asked about ISA's views on proposals for joint superannuation accounts as a way
of responding to the fact that women are far more likely than their male
partners to be primary caregivers and undertake unpaid labour, Ms Campo
responded that ISA did not see this as a structural solution.
Ms Campo's colleague, Mr Goodwin, added that the real problem was one of
Therefore, splitting what is there will not resolve the issue
of inadequate retirement income for women. That is the case for most women who
are in a relationship, and it is definitely the case for women who are not in a
The National Foundation for Australian Women indicated that it opposed
joint superannuation accounts, on the grounds that joint accounts would be a
move away from the notion of economic independence for women in their working
life and in retirement:
We think that there are issues of household dynamics that
would suggest that that is not a great idea, and that there are other ways of
simplifying division of superannuation in the event of a separation. In the
meantime, I think it is better to encourage separate control. If the woman has
control over her own superannuation, she has a better chance of actually being
able to say what happens and of having control over her own retirement.
Similarly, ACOSS expressed opposition to joint superannuation accounts,
on the grounds they would 'increase women's financial dependence on their
partners and again mainly benefit higher income couples'.
The committee considers there may be merit in introducing joint
superannuation accounts, however this is unlikely to produce a significant
reduction in the aggregate gap between men and women's superannuation balances.
The committee also notes there are significant risks involved in moves in this
direction. In particular, the committee notes concerns that joint
superannuation accounts may undermine efforts to improve and secure the
financial independence of women, both during their working lives and in
retirement. Any consideration of introducing joint superannuation accounts
should have regard to such risks.
Retirement products addressing
Some submissions noted that women may benefit more from products that
address longevity risks (such as annuities) as women have a longer life
expectancy than men. As such, they recommended increasing the availability of
and removing regulatory barriers impeding the development of income stream
The most common superannuation income stream products are account-based pensions
which allow for lump sum withdrawals and do not provide certainty of how long
an income stream will last. Annuities generate a regular income stream for a
determined period, and lifetime annuities manage the risk of outliving
retirement savings by sustaining an income for the life of the recipient.
ASFA suggested that, as things stood, the superannuation system was only
'half designed', in the sense that it was designed for accumulation but lacked
design features for income streams in retirement:
That is why providers are very limited in what they can
offer. There is no competition there and there is not a framework around
governance or transparency. The work that has been started around opening up
and being able to provide different types of income stream products is very
The Productivity Commission noted that there were a range of reasons for
the current low demand for annuities including: the preference for flexibility;
the difficulty retirees' face in understanding the risk of outliving their
savings and the role of the Age Pension in managing this risk; and the removal
of concessional treatment of annuities.
In relation to the apparent need for superannuation products that better
address longevity risk for superannuation accounts in retirement phase, the
committee notes that the government is currently undertaking a Review of
Retirement Income Stream Regulations, including:
the regulatory barriers restricting the availability of relevant
and appropriate income stream products in the Australian market; and
the minimum payment amounts for account-based pensions, to assess
their appropriateness in light of current financial market conditions.
It is the committee's hope that in undertaking this work, the government
gives appropriate consideration to gender issues and the specific needs of
women in retirement.
The committee recommends that all government policy analysis in relation
to retirement incomes include specific analysis comparing the impact of each
proposal on men and women.
Navigation: Previous Page | Contents | Next Page