Removing ‘age discrimination’ from super a positive step

The new legislation also includes a reduction in the downsizer contribution eligibility age and the removal of the $450 income threshold for superannuation guarantee. Each of the measures come into effect from 1 July 2022.

SMSF Association policy manager Tracey Scotchbrook said the passage of this bill and the regulations would help remove age discrimination from the superannuation system.

Measures in this bill will also play an important role in improving superannuation balances and retirement income for women, she said.

Ms Scotchbrook noted that women have already benefited from downsizer contributions, with 55 per cent of downsizer contributions for the 2019 income year being made by women.

“The removal of the work test will also allow women the opportunity to top up superannuation balances in retirement if they receive an inheritance, sell property or investments,” she stated.

The gender retirement gap, she said, continues to be an ongoing problem for the superannuation system, with research by the Melbourne Institute showing that, on average, Australian men enter retirement with $476,744 while women had just $289,277.

MARIA analysis undertaken by Treasury in 2019 found that while future superannuation balances at retirement will continue to increase for both genders, women’s balances will continue to lag and remain behind men’s balances until post-2060, stated Ms Scotchbrook.

“In most families, women are still the primary carers of children, which means they spend more time out of the workforce than men, and often return to work part-time. There are also larger systemic issues such as the gender pay gap, rise of the gig economy and design of the superannuation system which means it is not as effective for part-time or low-income earners,” she explained.

“Typically, the compounding effect of long-term savings, like superannuation, sees underlying differences between gender pay, participation rates and other factors make the retirement gap larger.”

Given superannuation is based on a percentage of income earned, it is difficult for many women to contribute similar amounts to men over their full working lifetime.

Ms Scotchbook noted, however, that there is also a change in working patterns for men who step into a caregiver role while their spouse returns to full-time work.

“This cohort will be similarly impacted in the long terms as discussed above,” she said.

Taking these factors into account, the SMSF Association believes superannuation should be viewed in the framework as a “couple” where it is appropriate to do so, Ms Scotchbrook explained.

“Couples make considered mutual decisions in which one partner usually makes sacrifices to support another. This means there should be effective mechanisms to facilitate this approach,” she said.

In its pre-budget submission, the SMSF Association has proposed a spousal superannuation benefit rollover.

“This would allow an individual with a higher superannuation balance to rollover a portion of their superannuation balance to their spouse to help equalise balances,” said Ms Scotchbrook.

“The spousal rollover could be targeted to be used by appropriate cohorts using age limits and limits on amounts. For example, it could be limited to a once-off maximum rollover amount, and to individuals under the age of 75.

“This measure would provide an effective and efficient way to improve the superannuation retirement gap between spouses and would particularly benefit women.”