Super tax rebate scheme could help close gender gap, according to KPMG
To address Australia’s gendered superannuation gap, a new report from KPMG suggests that women and men who take time off work to raise children should get a superannuation tax rebate, thus ensuring they don't miss out on making additional contributions to their retirement.
According to KPMG, women in the pre-retirement age bracket of 60-64 years have saved roughly $57,000 less in superannuation than men of the same age, with women’s super funds totalling $146,900 on average, compared to $204,107 saved by men. That’s a 28 per cent gap.
There are a range of reasons for the unequal superannuation retirement balances between men and women, but chief among them is time spent out of the workforce to act as the primary carer of children.
That’s why a new report from KPMG proposes rebating, for a limited period, the 15 per cent superannuation contributions tax (SCT) that is charged on all concessional contributions for those who have taken time out of the workforce to care for children.
The rebate would apply to the first five years of work following time spent as a primary carer, which would be defined as a period where a person is not paid for full-time work and is caring for one or more children who are either under six years of age or under 16 and have a disability.
KPMG estimated the incentives for this program to be twofold. Not only would it support primary carers in catching up to the extent of 50 per cent of the mandatory concessional contributions they might have otherwise made, it also provides an incentive for carers to resume the level of paid work they had been doing before taking time out to look after children.
Linda Elkins, a partner at KPMG, described this approach as a way to help carers make up for lost super quickly, and early on.
“The aim is to support the primary carer in catching up to the extent of a maximum of 50 per cent of the contributions that might reasonably have been made, had they continued to work as they did before leaving the workforce,” Ms Elkins said.
KPMG believes the primary carer rebate would make a big difference for women, particularly those in lower paid employment.
Alison Kitchen, chairman of KPMG Australia, said the rebate would function as a mechanism to compensate for “women’s time out.”
“Time spent out of employment is a major contributor to unequal levels of superannuation balances, as women miss out on super contributions in some of their peak working years,” Ms Kitchen said.
KPMG includes three other recommendations in its latest report that it suggests lawmakers should consider to help primary carers catch up on their superannuation balances.
They include the creation of a supplementary concessional contributions cap, removing the five‑year limit on utilisation of concessional contributions caps relating to years spent as a primary carer, and top‑up contributions for low‑income primary carers.
One or more of these options could all contribute to closing the gender super gap and create greater financial security for older women, KPMG argued, noting that 55 per cent of those currently collecting the full pension in Australia are women.