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

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 you create a superannuation account?

Before you create a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

What are concessional contributions?

Concessional contributions are pre-tax payments into your superannuation account. The payments made by your employer are concessional payments. You can also make concessional contributions with a salary sacrifice.

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.

What are the age pension's age rules?

Australians must be aged at least 65 years and 6 months to access the age pension. This eligibility age is scheduled to increase according to the following schedule:

Date Eligibility age
1 July 2019 66 years
1 July 2021 66 years and 6 months
1 July 2023 67 years

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 do you find lost superannuation funds?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

When is superannuation payable?

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

What compliance obligations does an SMSF have?

SMSFs must maintain comprehensive records and submit to annual audits.

How do I choose the right superannuation fund?

Different superannuation funds charge different fees, offer different insurances, offer different investment options and have different performance histories.

So you need to ask yourself these four questions when comparing superannuation funds:

  • How many fees would I have to pay and what would they cost?
  • What insurances are available and how much would they cost?
  • What investment options does it offer? How would they match my risk profile and financial needs?
  • How have these investment options performed historically?

What age can I withdraw my superannuation?

You can withdraw your superannuation (or at least some of it) when you reach ‘preservation age’. The preservation age is based on date of birth. Here are the six different categories:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

When you reach preservation age, you can withdraw all your superannuation if you’re retired. If you’re still working, you can begin a ‘transition to retirement’, which allows you to withdraw 10 per cent of their superannuation each financial year.

You can also withdraw all your superannuation once you reach 65 years.

How does the age pension work?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

Do I have to pay myself superannuation if I'm self-employed?

No, self-employed workers don’t have to pay themselves superannuation. However, if you do pay yourself superannuation, you will probably be able to claim a tax deduction.

Is superannuation included in taxable income?

Superannuation is not included when calculating your income tax. So if you have a salary of $50,000, your assessable income would be $50,000, not $50,000 plus superannuation.

That said, superannuation itself is taxed. It is generally taxed at 15 per cent, although if you earn less than $37,000, you will be reimbursed up to $500 of the tax you paid.