COVID-19 drags women 36 years away from economic equality

COVID-19 drags women 36 years away from economic equality

COVID-19 has pulled Australian women four years further from economic gender equality, with the economic shock leaving more women without full-time jobs, according to new research.

Financial equality between men and women is not expected to be achieved for at least 36 years, the latest Financy Women’s Index indicated. This is up from 32 years in the March quarter, when Australia was still in the early stages of the pandemic.

“Since March, each month that has gone by with COVID-19 has added another year to the time it will take to achieve economic equality,” Bianca Hartge-Hazelman, founder and author of the Financy Women’s Index, said.

The Financy Women’s Index tracks and measures the economic progress of Australian women on a quarterly basis.

Ms Hartge-Hazelman added that pre-pandemic, the growth rate of female workforce participation had been outperforming that of men.

Nicki Hutley, partner at Deloitte Access Economics, which produced economic modelling for the index, said the findings suggested the coronavirus has slowed the financial progress of women in Australia.

“As the Financy Women’s Index shows, COVID-19 has only exacerbated the divide between men and women in paid and unpaid work,” Ms Hutley said. 

“Even if we return to the path of improvement seen before the pandemic, we remain a full generation away from achieving equality.”

What has changed for women during COVID-19?

The Financy Women’s Index increased by 2.4 points, or 3.3 per cent, to 73.7 in the three months to June, but this did not mean things were looking up for women financially. Ms Hartge-Hazelman attributed this to a bigger surge in underemployed men than women, with the gender underemployment gap closing by 17.2 points in the three months to June.

“The reason for the sharp increase in male underemployment relative to female can be partly attributed to there being a greater number of men who were working full-time who are now having to work part-time as a result of the impact of the virus,” she said.

“For women, the significant decline in the participation rate may largely reflect the changes in JobSeeker assistance which dropped the requirement to look for a job. It may have also been affected by an increase in unpaid care work, which is disproportionately carried out by women.”

The gender workforce participation gap and the gender pay gap grew by 1 point and 0.8 point respectively during the pandemic period, according to the index. The average female full-time employee makes $254 a week less than the average working man.

Ms Hartge-Hazelman said it’s likely that the gender gap in unpaid work could widen further. 

“The gender gap in unpaid work shows that in normal times, women in relationships are doing 60 per cent more than men. This disparity is widely considered a significant barrier to increased female work participation and therefore financial progress,” she said.

On the upside, female representation on ASX 200 boards jumped slightly.

“The one area where positive progress has occurred is in the number of women in ASX 200 board positions, which increased to 31.3 per cent in the June period, up from 30.7 per cent in March, according to data company OpenDirector.com.au,” Ms Hartge-Hazelman said.

Gender super gap may not close for another 18 years

The index showed that the gender gap in retirement savings has remained stable and had been closing pre-coronavirus. However, it is still estimated to take 18 years for women to catch up with men on their super balances.  

According to AustralianSuper, Australia’s biggest super fund, the average gender super gap among its members widened to 26 per cent in June, up from 25 per cent as recent as six months prior.

“With more women suffering job losses than men in the June quarter, it’s likely to have meant less money going into superannuation,” Ms Hartge-Hazelman said. 

“If this trend were to re-emerge despite signs of a relative recovery in female employment, there is a risk of the gender gap widening in super.”

The majority of super fund HESTA members who withdrew from their retirement savings due to being financially affect by the pandemic were women, many of whom were on low incomes. 

Ms Hartge-Hazelman noted that it may not be until 2021 when the full impact of the pandemic on women’s financial progress can be measured.

Money tips for women

1. Take control of your own money matters

If the pandemic has taught us anything, it may well be the importance of budgeting. Take this opportunity to become more organised with your personal or household finances.  Understand your debts and expenses and use your spare time to put your budget under a microscope. It’s also important not to be financially complacent. Consider getting involved in all of the financial decision-making within the household. When the time comes to choose a financial product of any kind, take the time to compare multiple options while considering your personal or your family’s needs.

2. Replenish your super 

While it’s easy for many people to put your retirement savings plan on the backburner, it’s arguably more important for women to give some thought to their super, given the gender super gap. It might be worth considering making additional contributions to your nest egg, especially if you’ve taken time out of work to have a child or provide unpaid care for others. You could use free resources such as MoneySmart’s superannuation calculator to estimate how much you might need to comfortably retire. Consult a retirement planner for more specific advice.

3. Make sure you have access to an emergency fund

As COVID-19 has demonstrated for many of us, life can come with twists and turns. That’s why it’s vital to have a rainy day fund in case of unexpected events. If you’re not certain how much you might need in this emergency fund, here’s one way of approaching it. Consider how much you need to get by in one regular month and multiply that by, say, three months. This way, you may have a few months’ worth of expenses in your back pocket. Depending on your financial circumstances, it may even be safer to save more for the future.

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Learn more about superannuation

How do you calculate superannuation from a total package?

Superannuation is calculated at the rate of 9.5 per cent of your ‘ordinary-time earnings’. (For most people, ordinary-time earnings are their gross annual salary or wages.) So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

As the Australian Taxation Office explains, some items are excluded from ordinary-time earnings. They include:

  • Overtime work paid at overtime rates
  • Expense allowances that are fully expended
  • Expenses that are reimbursed
  • Unfair dismissal payments
  • Workers’ compensation payments
  • Parental leave
  • Jury duty
  • Defence reserve service
  • Unused annual leave when employment is terminated
  • Unused long service leave when employment is terminated
  • Unused sick leave when employment is terminated

Although the superannuation guarantee is currently at 9.5 per cent, it is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How much is superannuation in Australia?

Superannuation in Australia is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How does superannuation work?

Superannuation is paid by employers to employees, at least once every three months. The ‘superannuation guarantee’ is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary. The guarantee is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Superannuation is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

 

What is the superannuation rate?

The superannuation rate, or guarantee rate, is the percentage of your salary that your employer must pay into your superannuation fund. The superannuation guarantee has been set at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How do you pay superannuation?

Superannuation is paid by employers to employees. Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

Currently, the superannuation rate is currently 9.5 per cent of an employee’s ordinary time earnings. This is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

How much is superannuation?

Superannuation is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Can I take money out of my superannuation fund?

Superannuation is designed to provide Australians with money in their retirement. The government has strict rules around when people can take that money out of their fund because it wants to prevent people eroding their savings before they reach retirement.

As a general rule, you can only take money out of your superannuation fund when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

That said, you can take money out of your superannuation fund early based on one of these seven special conditions:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

How is superannuation calculated?

Superannuation is calculated at the rate of 9.5 per cent of your gross salary and wages. So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How do you calculate superannuation?

Superannuation is calculated at the rate of 9.5 per cent of your gross salary and wages. So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Am I entitled to superannuation if I'm a part-time employee?

As a part-time employee, you’re entitled to superannuation if:

  • You’re over 18 and earn more than $450 before tax in a calendar month
  • You’re under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

How do I set up an SMSF?

Setting up an SMSF takes more work than registering with an ordinary superannuation fund. 

An SMSF is a type of trust, so if you want to create an SMSF, you first have to create a trust.

To create a trust, you will need trustees, who must sign a trustee declaration. You will also need identifiable beneficiaries and assets for the fund – although these can be as little as a few dollars.

You will also need to create a trust deed, which is a document that lays out the rules of your SMSF. The trust deed must be prepared by a qualified professional and signed by all trustees.

To qualify as an Australian superannuation fund, the SMSF must meet these three criteria:

  • The fund must be established in Australia – or at least one of its assets must be located in Australia
  • The central management and control of the fund must ordinarily be in Australia
  • The fund must have active members who are Australian residents and who hold at least 50 per cent of the fund’s assets – or it must have no active members

Once your SMSF is established and all trustees have signed a trustee declaration, you have 60 days to apply for an Australian Business Number (ABN).

When completing the ABN application, you should ask for a tax file number for your fund. You should also ask for the fund to be regulated by the Australian Taxation Office – otherwise it won’t receive tax concessions.

Your next step is to open a bank account in your fund’s name. This account must be kept separated from the accounts held by the trustees and any related employers.

Your SMSF will also need an electronic service address, so it can receive contributions.

Finally, you will need to create an investment strategy, which explains how your fund will invest its money, and an exit strategy, which explains how and why it would ever close.

Please note that you can pay an adviser to set up your SMSF. You might also want to take the Self-Managed Superannuation Fund Trustee Education Program, which is a free program that has been created by CPA Australia and Chartered Accountants Australia & New Zealand.

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

Click here for more information.

SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

Click here for more information.

Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

Click here for more information.

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

What are my superannuation obligations if I'm an employer?

Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.