Findings from the latest Australia Institute (TAI) report reveal the stark consequences of a skewed tax concession system that favors higher income earners, leaving women with markedly lower super balances upon retiring. According to their analysis, the tax concessions intended to provide financial relief have culminated in a loss of $54.56 billion in revenue for the 2022-23 fiscal year alone, with the wealthiest 20% of earners claiming over half of these benefits.
Strikingly, the research discerned that a mere 2.5% of the workforce possesses a super fund exceeding $1 million. Yet, this small fraction accounted for an estimated 20.1% of all personal super contributions in 2020-21. Consequently, the Institute has advocated for a revocation of tax concessions on super contributions and earnings for the top 10% of Australians.
While the original article by Blake Antrobus of NCA NewsWire outlines the overall gap, our focus delves into the nuanced gender inequities intensifying this disparity. Women received just 42% of total tax benefits from super contributions and were confined to 39% of superannuation earnings benefits, intensifying their financial disadvantage over the long term.
The TAI report underscores that, as of 2019, men aged 60 to 64 had a median superannuation balance around $178,800, a stark contrast to the $137,050 saved by women of the same age—a 23.4% gap that snowballs into broader implications as Australia’s population ages.
Dr Ming Ngoc Le, a postdoctoral fellow spearheading the TAI study, insists that addressing this imbalance could preserve over $12 billion annually. She observed that high-income earners currently enjoy more significant government support per the Treasury estimates, slanting the benefits of the super system away from lower and middle-income Australians.
"Maintaining the tax concession system as it is will soon make it costlier than the age pension itself, which undercuts its intended role," remarked Dr. Le.
Moreover, projections suggest that by the mid-2040s, the cost of superannuation tax concessions will surpass that of the age pension, enforcing a backward approach to retirement funding. Dr. Le thus emphasizes redistributing these benefits to bolster support for Australians navigating poverty, advocating for tighter restrictions on who can access such concessions to optimize fairness and government revenue.
This shake-up also accompanies the Federal Government's March announcement, stipulating that superannuation will be incorporated into government-funded parental leave starting July next year. This reform is projected to inject an additional $5,100 into the super savings of new mothers—a welcome relief that might modestly lessen the gender imbalance in retirement savings.
Simultaneously, recent modifications to award and minimum wages by Australia’s industrial relations commission, which saw a 3.75% increase, signify another step toward addressing systemic income and savings disparities. More than 2.6 million workers will experience a pay rise, effectively pushing the national minimum wage to $24.10 per hour from July 1.
However, as noted by Justice Adam Hatcher, Commission President, the wage adjustments were carefully balanced to not overshadow current inflation rates, measured at 3.6% as of March, amid lukewarm productivity growth.
With substantial percentages of the workforce relying on structured award rates or the national minimum wage, these structural readjustments are essential steps toward a more balanced economic future, particularly for Australian women.
