The Government’s abolition of the Low Income Super Contribution (LISC) is the single most retrograde and regrettable policy decision since the establishment of superannuation and will help cement the gender gap in savings if reforms to tax concessions do not occur, the Shadow Treasurer Chris Bowen said.
The LISC was setup by the previous Labor Government to help low-income earners save for retirement. Those on less than $37,000 a year could receive up to $500 from the government straight into their superannuation account. The Abbott Government has abolished this with the repeal due to come into effect in 2017.
This comes at a time when tax concessions for superannuation are the fastest growing concession in the federal budget, growing at four times the rate of the Age Pension. At the current rate it will exceed the entire cost of the Age Pension in four years.
Bowen said it was known that tax concessions largely accrue to those at the top of the income scale – 40 per cent flows to the top 10 per cent of income earners – a cohort mostly represented by men.
“This is unfair to Australia’s low income earners and unfair to women. This represents a deliberate transfer of wealth from women to men,” Bowen said in his address at the Centre for the Economic Development of Australia’s (CEDA) launch of its third policy perspective for 2015.
Quoting a Rice Warner study he added the top 10 per cent of male income earners receive a benefit of about $1.5 million in concessions over their lifetime.
Meanwhile those in the lowest income decile, a cohort represented mainly by women, did not receive any concession when it came to contributing to their superannuation fund, “in fact, it costs single females in this decile over $32,000 dollars, or about three years of work, over their working life”.
Research from the AIST-Mercer Super Tracker rates the current gender gap at 6.26. A score of 10 means there is no gender gap in respect of super benefits at retirement.
“This Government has shamefully abolished the LISC (low income super contribution) in one of its most retrograde steps. This terrible policy decision will see millions of women starved of any concession when contributing to their superannuation fund,” Bowen said.
“Two years ago the Prime Minister appointed himself minster for women and yet the single biggest policy decision this Government has made when it comes to impacting women is a very retrograde one.”
Tom Garcia, chief executive of AIST, agreed the removal of LISC was a backward step and has urged the Government to prioritise the tax reform of superannuation as a significant step towards improving retirement outcomes for women.
“The existing heavy weighting of tax concessions to high income earners is a key factor behind the gender gap in retirement outcomes. Improving tax equity in superannuation – including retaining the LISC – was also recognised as a key opportunity and priority to address the gender saving gap by the many stakeholders who attended the AIST-WIS inaugural Women’s Super Summit last year.” Garcia said.
In another point in his address to CEDA, Bowen ruled out Labor supporting the opening up of superannuation accounts to assist first time buyers in entering the housing market.
Bowen also said he had yet to hear from Government on the widely desired proposal for bipartisan agreement on the definition for the purpose of superannuation.