Australian working women have a choice this federal election: they can vote to improve their own financial position by a little, but certainly not a lot.
Both parties have made announcements, in and outside of their recent budget speeches that will go some way in assisting the financial wellbeing of women with respect to pay and superannuation.
Whitehead Dingley and Betar senior accountant Kate Hills says the promises made by both parties are limited – and their impact could mean the difference of a few hundred or even thousands of dollars in savings.
Three of the key election and budget promises that affect women on money include:
A promise by both parties to increase personal tax cuts for low and middle-income earners – many of whom are working women.
The Coalition has promised to increase the age limit for spouse superannuation contributions to even up balances given that women’s balances are on average 30-40 per cent lower than men’s accounts.
Labor has vowed to include employer superannuation contributions on certain paid parental leave schemes and reduce the compulsory superannuation guarantee contribution threshold to nil from $450 a month, which will go a long way to supporting casual workers – many of which are women working around caring responsibilities.
But Terry Fitzsimmons, senior lecturer in leadership theory at UQ Business school, says he’s disappointed that the major parties haven’t delivered more for women in the lead up to the election, particularly around the gender pay gap and general workplace equality policies.
“Labor is certainly more engaged on these issues than the Liberal Party. You only have to look at the people they have in their party, there are some very strong women in Tanya Plibersek, Penny Wong and Kristina Keneally,” Fitzsimmons said.
“Internally they get it, but I think more needs to be done on their workplace gender equality policy response.
“The Liberal Party has failed do anything to show real leadership on gender equality. Just look at what they did to Julie Bishop.
“Ultimately both parties have work to do, and until they realise that unless they have gender equality in federal cabinet, where the Australian population is represented for what it is about 50 per cent women and men, then you won’t have women’s issues on gender equality and on financial disadvantage being tabled and heard.”
So if we look at the average working woman on roughly $65,000 a year, here’s how some of the key election promises may affect her money.
If re-elected, the Coalition under Prime Minister Scott Morrison has promised to:
Increase personal income tax brackets from July 2022, starting with the 19 per cent tax bracket for earnings up to $45,000; and introducing a 30 per cent mega tax bracket of $45,000 and $200,000, effectively removing the 37 per cent tax bracket.
For the average full-time working woman on roughly $65,000 a year, this means a tax savings of around $1,581.
Increase the Low Middle Income Tax Offset to $1,080 for people earning between $48,000 and $90,000.
It means: Individuals with taxable incomes up to $37,000 will have their tax reduced by up to $255. This will increase incrementally for those earning between $37,000 and $48,000. The maximum offset of $1,080 will be available to taxpayers with taxable incomes between $48,000 and $90,000. The offset then gradually reduces to zero at a taxable income of $126,000. The offset will be received as a lump sum on assessment after individuals lodge their tax returns.
If elected, Labor under Opposition leader Bill Shorten has promised to:
Match the Coalition’s Low Middle Income Tax Offset, plus workers earning up to $37,000 would also receive a bigger $350 tax offset.
Decrease the Capital Gains Tax discount from 50 per cent to 25 per cent on the sale of investments purchased after January 1, 2020.
Disallow negative gearing losses to be used to offset against salary income (excluding new residential premises). Instead, these losses can be used in reducing any gain from the disposal of the asset.
Increase the top tax rate to 49 per cent. This means less money for high income earning families and has no impact on the average full-time working woman.
Place a $3000 limit on individuals claiming a tax deduction for tax agent fees. This is likely to affect women in business or those with more complicated tax affairs.
Disallow cash refunds of excess franking credits, excluding government pension recipients. This means that women on low incomes paying less than 30 per cent in tax will no longer be able to receive cash refunds for dividend franking credits. This could equate to hundreds of dollars they miss out on (and most probably rely on) each year. This will also affect self-managed super funds paying pensions.
Increase the instant asset write-off from $25,000 to $30,000. This is a win for women running their own or family business and it can greatly reduce the tax paid by the business.
Introduce a minimum tax rate of 30 per cent, instead of a person’s marginal tax rate, on all trust distributions made to persons over 18 years old.
This may disadvantage women (and/or men) on low incomes, paying less than 30 per cent tax, who receive trust distributions from family trusts to supplement their income while taking a break from work to have/raise children.
Increase the spouse super contribution age limit to 74 years - this is the age of the spouse receiving the contribution. This will help the recipient spouse with a smaller super balance, usually the non-working wife, to increase their super.
The contributing spouse may have received this extra money through a retirement payout, selling their business, or receiving an inheritance, which they wish to contribute as a spouse contribution. As people are working and living longer, this is happening later in life so the increase to 74 is important.
Extend the employer superannuation guarantee (SG) contributions to include paid parental leave payments to include those on a Commonwealth scheme.
Currently, commonwealth paid parental leave is $719.35 a week before tax for a total of 18 weeks per child.
This would mean super of $68.33 per week would be added – at 18 weeks this equates to $1,230.
Decrease the threshold for compulsory SG contributions from $450 to NIL over four years. This will help those working a number of small casual jobs, mainly younger workers and women, to ensure they receive super.
Plans to decrease non-concessional contribution (after tax contribution) cap from $100,000 to $75,000. This will restrict the amount of catch up payments women can make to rebuild their super after career breaks. Until there is no gender pay gap, such concessions don’t address the basic problem of differential contributions.
Proposal to reduce threshold for Division 293 tax on contributions to $200,000. This means that anyone with taxable income over this amount will pay an extra 15 per cent tax on concessional contributions – that is employer SG and personal tax deducted super contributions.
Labor’s superannuation changes are likely to have a bigger impact on women than the Coalition’s and if rolled out more broadly could greatly assist in closing the gender gap in retirement savings.
But a Coalition government is likely to deliver a more immediate benefit to working women because of its proposed flattening of tax brackets and tax cuts.
As a result a taxpayer on an average income of $65,000 will be better off under the Coalition’s tax policy.
That said, if Labor matches the Liberal party’s tax cuts in full, this combined, with its superannuation changes, would provide a greater win for the average working Australian women.