Sometimes I feel as women we have come so far.
I mean it was only in my mum’s generation that women were banned from entering a public bar! Now we’ve had female Prime Ministers and the number of women on ASX Listed company boards is increasing rapidly (women now represent 26.2% of ASX boards a dramatic increase from just 8.3 percent in 2009*)
Then sometimes I feel we still have a long way to go. Women on average:
- Earn almost 19% less than men for the same work (yes the same work!**)
- Retire with around half as much super as men***
- Earn $700,000 less than men during their lifetime***
So why are we still lagging financially?
Well, it’s a combination of factors. Women often take time out of the workforce or work part-time to raise a family and tend to be employed in occupations which are lower paid.
Personally, I feel women undervalue themselves and aren’t very good at asking for what they are worth in the workplace (ill show you later how to fix this)
Anecdotally I know women can put off going for higher paying roles as they feel they aren’t qualified (they feel they need to tick all the boxes and know how to do everything perfectly).
Whereas blokes tend to dive in and apply for roles with an attitude of “I can do like 70% of this … the rest I can figure out as I go”
Why does it matter?
So why does It matter if women don’t earn as much or don’t have as much super as men?
Well having more money gives you more choices. If women don’t earn as much they don’t have as many choices. This could mean maybe they stay in a bad relationship because they know if they leave things will be hard for them financially.
Money = Power + Control
What can we do about it?
The good news is there are some strategies available to help with financial equality
1. Share the parenting load
Sharing the parenting load and both working part-time to raise children would help with financial equality.
Plus over 90% of men and women believe that men should be as involved in parenting as women.
The problem is whilst our attitudes have progressed our employers have not. With men much more likely to have flexible work arrangements denied.
2. Negotiate a pay rise
Sometimes I think women don’t get paid more because they don’t ask! I helped a client recently negotiate a 20% pay increase just because she asked.
When negotiating a pay rise it’s important to:
- Know what you are worth – look online for data about your industry (make sure you look at the region as well as this can vastly impact salaries)
- Write a list of all the ways you have saved/made the company money or can save/make the company money
- List any processes you have created that reduced risk or saved time
- Then arrange a meeting with your boss detailing the reasons you think you are worth more. If they say “No” ask when it will be next reviewed and what you have to demonstrate to get a pay rise.
- If they still don’t value you then make sure you value yourself and find another job
3. Your partner can split their super contributions with you
Superannuation contribution splitting allows a member of a superannuation fund to transfer employer and/or personal tax-deductible superannuation contributions made in the previous financial year into their spouse’s superannuation account.
A contribution splitting application must be given to the super fund by 30 June of the following financial year
So if you do take time out of the workforce, maybe earn less or work part-time than your partner can use some of their super contributions to boost your super balance.
What I like about this strategy is it doesn’t have to come from your cash flow ie from your bank account as your partner’s employer contributions can be given to your super fund.
4. Let the government boost your super
If you put $1,000 into super from your bank account (ie a non-concessional contribution) then the government could give you $500.
That’s a 50% return on your money! (compare this to if you left your money in your bank account you might get 2% or off your home loan you might get 5%)
To qualify for the full $500 you need to have an income of less than $36,813. Once you earn over this then the amount the government kicks in reduces and once you earn more than $51,813 you don’t get anything.
Other eligibility criteria also apply. One example is that application of the 10% test (having at least 10% of income from employment or business income)
Case study – meet Tracey
- Tracey is 40 years of age and is a part-time administrative assistant earning $35,000 p.a.
- She makes a personal after-tax super contribution of $1,000 to receive her maximum Government co-contribution of $500 – a real superannuation boost!
Smart super tip: if you have a particular year where you are earning less or no income e.g. during maternity leave, you should consider a Government co-contribution strategy. Plus you can make this contribution weekly – $20 pw is much easier to find then $1,000
5. Let your partner boost your super
This strategy allows a higher-income earning spouse to make after-tax contributions to a lower-income earning spouse’s super fund to boost their retirement savings.
- If your assessable income (plus reportable fringe benefits and reportable employer super contributions) is $37,000 or less, your spouse receives an 18% tax offset (up to a maximum of $540) on the first $3,000 of their after-tax spouse contribution.
- The tax offset reduces if your income is greater than $37,000 and cuts off once your income reaches $40,000.
How can you/your spouse benefit?
- The higher income earning spouse puts in $3,000 to the lower income spouse super and they get $540 tax offset. That’s an 18% return on their money straight away!
Case study – meet Craig and Angela
- Craig, aged 35, earns $120,000 p.a. and has reached his concessional contributions cap.
- Angela, aged 35, homemaker earning $8,000 p.a.
- Craig invests a further $3,000 from their bank account into Angela’s super.
- Result – Craig receives a $540 tax offset and both Craig and Angela are tax-effectively saving for their retirement
Smart Super Tip: You can make this contribution weekly ($60 pw is much easier to find then $3,000 all at once)
6. Catch up Super Contributions
The government has reduced what you can put into super each year (your concessional contributions which are things like your employer contributions and salary sacrifice is now limited to $25,000 per financial year).
Often when people hear this they ask me why would the government limit what you can put into superannuation …. I thought they wanted us saving for our retirement? You see when money gets put into superannuation on a pre-tax basis the tax is 15% which is usually a lot less then if you get taxed on it personally. In short, the government often makes more money from taxes if you don’t put money into super and hence why they have limited what you can put into super.
Which means if you take time out of the workforce to raise a family you may be disadvantaged as you may no longer be able to catch up your super contributions latter.
But now individuals with a total superannuation balance of less than $500,000 just before the beginning of a financial year will be able to carry forward unused concessional contribution cap space from the five previous financial years. It only comes into force from 1 July 2018 so the first of any catch up can only start 1 July 2019.
Want to see how your super balance compares to others your age?
Sometimes seeing how we compare to others lets us know if we are on track or way off.
If you would like a copy of our special report that shows how your super balance stacks up to others your age, then click the button below for instant access.
This report also shows the break up by gender as well so you can see how you are tracking against the opposite sex.
It’s important to continually educate yourself financially (its why you read this article) but it’s also equally important to take ACTION.
The longer you put off looking at these strategies the harder it is to bridge the gap and catch up. Plus the government is constantly changing the rules so these benefits may not always be available and you need to take advantage of them while you can.
Pro Tip: If you have read the above and are feeling a little overwhelmed with all the information or know you don’t have the time to look at it then let’s have a virtual coffee (phone chat) to see how we can help you. You can book a time by clicking here
*Australian Institute of Company Directors, Appointments to ASX 200 Boards (updated online resource).
**workplace Gender Equality Agency, 2015. The gender pay gap statistics p2.
***The Association of Superannuation Funds of Australia (ASFA), 2015.
****Australian Bureau of Statistics, 2014. Average Weekly Earnings, Australia, 6302.0 (multiplied by a 45-year career).
The views expressed in this publication are solely those of the author and are not reflective or indicative of licensee’s position, and are not to be attributed to the licensee. They cannot be reproduced in any form without the express written consent of the author.
Adele Martin is a financial adviser at Firefly Wealth and an Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 AFSL 238429.
The information (including taxation) in this article does not consider your personal circumstances and is of a general nature only. You should not act on the information provided without first obtaining professional advice specific to your circumstances.