Collecting more tax from very rich people – mostly men – is good for women.
The Albanese government is planning to change the tax concessions in relation to superannuation balances with the ‘Better Targeted Superannuation Tax Concessions Bill’, which Parliament is set to pass later this year. The changes will mean that people with more than $3 million in their superannuation account will pay slightly more tax on their super earnings.
Currently, we get a tax concession on superannuation earnings, which means that instead of our superannuation being taxed at the same rate as our wages, the money made from super investments is taxed at only 15 per cent. After the bill passes, those with more than $3 million in superannuation will instead pay 30 per cent on earnings, but only on the amount above $3 million.
For context, the highest earners, who have more than $190,000 in taxable income, face an income tax rate of 45 per cent. So, the new rate is still a significant concession for the very wealthy.
The tax concession is in place to encourage people to put money into their superannuation and invest in their retirement. This helps the government because it means there is less strain on the age pension system. However, some wealthy people have worked out that if they put their money into super, they won’t have to pay as much tax. Put simply, less tax from wealthy people means less money for government support and services for the rest of us.
This bill aims to make the system fairer.
Treasury predicts that the tax will only affect 80,000 people, or only 0.5 per cent of super account holders. In contrast, less than half of people in their 60s have more than $250,000 in super. The median super balance for people in their 60s is between $175,000 and $200,000 – less than a tenth of what would be required to be subject to the higher rate of tax.
What does this mean for women?
We know that women are likely to retire with much less superannuation than men. The Workplace Gender Equality Agency estimates that at retirement age (60-64), almost one in four (23 per cent) women have no superannuation. When we reach retirement age, women have on average, about $50,000 less than men in their superannuation accounts. In fact, the median super balance for a woman aged 60-64 is only $154,000.
Women receive less benefits from the current tax concession system – while men represent 51.5 per cent of taxpayers with super balances, they receive almost 60 per cent of the tax concessions. Conversely, women make up 48.5 per cent of taxpayers with super balances, but receive only 40 per cent of the tax concessions. This means that men are much more likely that women to be subject to the extra tax on super balances over $3 million.
Women have less super because they earn less money over their lifetimes; for every dollar that a man earns, a woman earns only 78c. Women are also more likely to take time out of the paid workforce to care for children, family members with disabilities and ageing relatives.
If a woman on the minimum wage takes five years out of the workforce to be a carer, she misses out on almost $30,000 in superannuation. More than half a million women currently relying on Carer or Parenting payments from the government receive no superannuation payments at all. The average amount of time spent on the Carer Payment is almost seven years. Why should the people, mostly men, with more than $3 million in super get tax breaks while these women work for free caring for our communities?
Confected outrage at the very wealthy paying slightly more tax is misguided and misdirected. The Australia Institute argues that if we leave things as they are, super tax concessions will soon cost the government more than the age pension – negating the whole point of encouraging people to invest in their own retirement in the first place.
The government estimates they will raise an extra $2.3 billion in revenue in the first full year of the tax increase, and $40 billion over the next decade. This extra revenue could fund the services and support that women rely on. It could fund more frontline domestic and family violence workers. It could help fund increases across the income support system, including the age pension – where 55 per cent of recipients are women. It could also pay for superannuation top-ups for carers and help ensure that they can retire with dignity.
If this government wants to make Australia fairer for women, and I believe it does, then this tax reform should be the beginning of a series of bold and brave moves to address inequality in our tax system.
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