Mind the gap: women, super & salary sacrifice

Superannuation is never far from today’s headlines. Only recently the Workplace Gender Equality Agency found that Australian women retire with 52.8% less super than men.

The gender pay gap is never far from today’s headlines, either. A recent ASFA report  details that “women, on average, earn lower wages compared to their male counterparts and this is then reflected in their super balances.”

The two are seemingly connected.

The Workplace Gender Equality Agency (WGEA) report that the gender pay gap is currently at 15.3%. While preparing for retirement can seem daunting for men and women alike, if you’re female, it might feel like the odds are increasingly against you. In which case, it’s a good idea to arm yourself with an understanding of the different tools and options that are available today that could help you secure a better future for later life.

Salary sacrifice

Salary sacrificing involves choosing to contribute some of your wage to your super, instead of receiving it in your regular pay packet.

By its very name, salary sacrifice might not seem ideal for the here and now, but you’ll have to debate whether your current super contributions are doing enough for your retirement.

Salary sacrifice can be a good way to grow your super, faster. The top two benefits of salary sacrificing include:

  • You could save tax

There could be tax incentives to salary sacrificing into your super fund.  All contributions to super via salary sacrifice are taxed at the flat rate of 15% (except for those who earn more than $250k a year), which represents a significant discount on the highest income tax rates. Refer to the below table.

Australian income tax rates 2017-2018
$0 – $18,200 Nil
$18,201– $37,000 19c for each $1 over $18,200
$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for every $1 over $180,000

If you currently earn under $18,200, you pay no income tax, so would need to consider whether it’s worth topping up your super when this scenario would lead to paying more tax. At the other end of the scale, if your annual taxable income is under $250,000 any extra salary you sacrifice to super only incurs 15% contributions tax. If you earn over $300,000 you will still only pay 30% tax on super contributions. This is considerably lower than the maximum income tax payable of 45%. There are limits on the amount you can salary sacrifice. Refer to our breakdown of contributions limits for more information.

Another benefit of superannuation investments are that earnings are taxed at the flat 15% rate, too. If you have investments outside of super, any earnings on these would be taxed at your marginal tax rate.

  • You can improve your chances of a comfortable retirement

According a global Future of Retirement report from HSBC, 74% of Australians aged 45 and over want to retire in the next five years, but 43% say they can’t. Of those people wanting to retire early, 71% said they have not saved enough money to do so.

While it might seem optimistic in today’s climate to retire at 50, the Australian Bureau of Statistic’s reports that the average age at retirement from the labour force for persons aged 45+ in 2014-15 was 54.4 (58.2 years for men and 51.5 years for women.)

Why does salary sacrifice matter to women?

With the gender pay gap women earn less that men on average, and one knock-on effect is that the average woman is retiring with less money in super than men. Salary sacrifice is just one option if you can afford to put today’s money aside for future growth. Below are a few more examples of how you can help boost your super.

Other ways to top up your super

  • Spousal contributions
    Your partner can contribute some of their after-tax earnings to your super account.
  • Government co-contributions 
    These come into effect when you make a non-concessional (after tax) contribution to your super fund. The federal government will give you a co-contribution which is completely tax-free. To be eligible you have to earn less than $51,813 for the 2017/18 tax year.
  • Find and consolidate lost super
    Losing track of super accounts happens more often than you think and it is easily done. Virgin Money Super make finding and consolidating lost super easy. Create an account and give Virgin Money Super permission to find your lost super, then bring all your accounts together using the super consolidation tool. It takes just a couple of minutes and there’s no forms or hassle.
  • Help save more with the ‘Baby Break’
    Some superannuation funds offer unexpected boosts to your retirement pot

For example, Virgin Money Super wants to empower women to bridge the gender super gap with our Baby Break offer. When you’re on maternity or paternity leave for up to 12 months, we’ll discount the asset based administration fee from 0.394% to 0.044%.

Conditions apply, so find out more about the Baby Break through Virgin Money Super.

Further tools

ASFA reported that almost 30% of women feel like they need more information on superannuation. While the current tools and services outlined here certainly won’t solve the gender pay gap, talking more about their existence and how they can benefit women of all ages may help.

There are a few further tools out there that could also help people prepare a more comfortable super fund.

Fee comparison tool

Virgin Money Super offer a free fee comparison tool that gives you an accurate depiction of what some different super providers charge, depending on your balance.

Retirement Income Calculator

Virgin Money’s retirement calculator allows you to estimate the level of your (and your partner’s, if applicable) superannuation benefit at retirement. You can see whether you have sufficient funds to provide you with the desired standard of living in retirement and whether you might be a position to receive government support – in the form of the Age Pension.

Related: 5 simple ways to boost your super