Carers should receive superannuation on their payments, a leading wealth management company is arguing.
And it says its proposal would save rather than cost the Federal Budget in the longer term.
The work of carers is often unsung, certainly undervalued and costs those dedicated individuals dearly in terms of lost wages, lost career goals and smaller nest eggs.
But KPMG has a solution.
Gender imbalance in super
First, consider the gender imbalance in superannuation balances. In 2007, according to the Australian Bureau of Statistics, the mean superannuation balance for males with accounts in the accumulation phase was $88,000, while for females it was $52,000.
In 2017-18, the median superannuation balance for women aged 55 to 64 was $119,000 compared to $183,000 for men of the same age.
In 2019-20, the median superannuation balance for men aged 60-64 was $180,928 whereas for women in the same age group it was $139,056, a gap of 23 per cent.
In its latest report, KPMG says that in the years approaching retirement age, the gender superannuation gap can be anywhere between 22 per cent and 35 per cent.
“(If super was added to carer payments) people – mostly women – who leave the workforce to look after aged, infirm or ill dependants could have their superannuation balances boosted by over $120,000,” says Linda Elkins, a superannuation executive and head of KPMG Australia’s national asset and wealth management practice.
“And it could be done at a neutral cost to the budget.”
That’s the conclusion of KPMG’s July 2023 report, Towards Gender Equality in Retirement. It states that on average, Australian men do an estimated 172 minutes of unpaid work per day compared with an estimated average of 311 minutes per day for women. That is, women on average do 80 per cent more unpaid work than men.
KPMG says the government must add superannuation contributions to that payment.
“This modest measure would be an immense boost for those recipients of the Carer Payment who provide constant care to someone who has a disability, severe illness or is frail aged, and who often have to leave the workforce for years, leaving them with minimal super balances,” says Ms Elkins.
Benefit to the budget
She argues that carers benefit the Federal Budget by providing a valuable service to society at a much lower cost than if the people they look after went into formal care.
“Not only would KPMG’s proposal properly recognise and value that role – and help close the gender superannuation gap, given that most carers are women – but it could be done cost-neutral to the budget over time.”
The report says that a person who began caring at age 35 and received the Carer Payment for 15 consecutive years would be $123,000 better off at retirement age if super was added.
KPMG’s economic analysis found that could be achieved at a budgetary cost of $45,500 per annum in real terms. But there could be further savings from a potential reduction of Age Pension payments due to carers’ higher superannuation balances.
Tax offset for carers?
The policy complements another KPMG recommendation – a Carer’s Income Tax Offset. That would take the form of a tax credit to offset personal income tax when a carer returned to the workforce.
KPMG argues that the tax break would provide an incentive for carers to return to work. But it also recognises that many carers are unable to re-enter the workforce, which is where the super guarantee comes in.
The report says the concept is highly equitable as recipients of the Carer Payment must satisfy a means test and therefore are on low incomes – and more than 70 per cent are women.
“Women called to engage in unpaid caring work are asked to pay a price not only in terms of lost earnings and missed career opportunities during their time as carers but also in the form of a less comfortable retirement in the future,” it states.
Do you support this proposal? Are you financially disadvantaged because you had to leave job to be a carer? Share your thoughts in the comments section below.