There is a significant disparity in superannuation between men and women in Australia. To mitigate this, the government’s Working for Women initiative aims to pay superannuation on paid parental leave. It‘s a much-needed move, but is it enough of a kickstart?
The recent announcement of the Working for Women initiative is being headlined by the government’s strategy to pay superannuation on funded paid parental leave. This move was a recommendation by the Women’s Economic Equality Taskforce.
The Women’s Economic Equality Taskforce was established in 2022, with its role being to prioritise advice to the government on the many issues facing women in Australia. This strategy is being widely touted as a bold move from Labor that addresses a pivotal issue reality to the disparities in superannuation balances between men and women.
The breakdown
Unequal superannuation is an issue that plagues working women right through to their retirement. One of the primary contributors is the disparity between men and women in terms of time spent out of the workforce due to being the primary caregiver for young children.
This initiative marks a significant step towards counteracting that disparity and closing the gender pay gap, which currently stands at 21.7 per cent. This is highlighted by the report published by the Workplace Gender Equality Agency (WGEA), released earlier in the month.
As individuals approach retirement age, the gender superannuation gap can range from 22 per cent to 35 per cent, with men aged between 60–64 years, on average, having a superannuation balance of $204,107, compared to women in the same age bracket having $146,900. That’s a 28 per cent gap between the two.
That’s not all, though; in fact, during the pre-retirement years of 55–59, the gap widens to 33 per cent, and during the peak earning years of 45–49, it reaches 35 per cent. The implications of this don’t fall solely on retirees, as individuals who often have low superannuation will instead rely on the age pension in retirement, with 55 per cent of those collecting the pension being women.
This expense is sourced through tax increases by the government, which, of course, impacts the wider community, an expense that is easily avoidable.
Minister for Women, Senator Katy Gallagher, said the Albanese Labor government is serious about ensuring women are supported when balancing caring and working responsibilities. “The data is clear – that when women take time out of the workforce to raise children, it impacts their retirement incomes with women retiring, on average, with about 25 per cent less super than men,” Gallagher said.
“Paying super on government parental leave is an important investment to help close the super gap and make decisions about balancing care and work easier for women.”
This investment from the Labor government was much needed to lessen the gender pay gap blow that is affecting women of all ages, but is it the drastic change that is needed to trailblaze towards gender equality?
More work to do
The question must be posed: is this too soft of an implementation when it comes to combating the structural, widespread issue of not only the gender pay gap but gender equality as a whole? Paid parental leave in itself has raised eyebrows in the past for being too short, being limited to only 20 weeks or 100 payable days.
The federal government is currently working towards extending that leave. If successful, from 1 July this year, families will have access to an extra two weeks of leave (22 weeks total), which will increase to 24 weeks from July 2025 and 26 weeks from July 2026. This still has to pass the Senate before it can come to fruition.
With the 20 weeks still being the baseline, it can often push women into returning to work before they have adjusted to parenthood and when their child is just four months old.
Different strategies that appear more comprehensive and targeted to nullify these gender gaps have been floated throughout this discourse. According to ASPL Group, here are some of those different strategies that could alleviate the gender retirement gap at a faster rate:
- Boost compulsory super contributions to 12 per cent, or even 15 per cent: By boosting the rate employers must contribute, we can start to increase the amount women receive throughout their working careers.
- Salary packaging options: Ensure employers provide salary packaging options to add to super to effectively reduce taxable income, as these tend to be taxed at 15 per cent, which is generally less than an individual’s marginal tax rate.
- Primary carer supplementary concessional cap: KPMG has recommended a primary carer supplementary concessional cap where the primary carer would be able to catch up to 50 per cent of the mandatory concessional contributions that might reasonably have been made had she (or he) not taken time out of the workforce.
- Remove concessional cap limit: Coupled with the primary carer supplementary concessional cap, the five-year limit on the utilisation of concessional caps for years spent as a primary carer should be eliminated.
- Equitable tax concessions: Ensure tax concessions are fair and equitable and reflect current living conditions, including cost-of-living crises and inflation.
These suggestions display the kind of concerted effort that a number of Australian women want to see when it comes to creating real change. It will be interesting to see if the government can implement such strategies to nullify the gender pay gap issues that are affecting women not only throughout their professional careers but also, as the stats show, right through to their retirement.
RELATED TERMS
The term "gender pay gap" refers to the customarily higher average incomes and salaries that men receive over women.
Parental leave is a benefit offered to employees that allows for job-protected time off from work to care for a kid once the child is born or adopted.
Kace O'Neill
Kace O'Neill is a Graduate Journalist for HR Leader. Kace studied Media Communications and Maori studies at the University of Otago, he has a passion for sports and storytelling.