Women who take time off work to have children have largely been recognised as struggling when it comes to saving for their retirement.
The government is now trying to help them build up their super by refunding tax paid on super contributions while they are living on a low-income, and allowing them to bump up their super in later years when they start earning higher wages again.
They will get up to $500 tax refunded if they earn less than $37,000, and will be able to rollover super balances for five years when they put less than $25,000 a year into super.
This will effectively avoid the situation in which low income earners would pay more tax on savings placed into superannuation than on income earned outside of superannuation and support retirement funding and/or insurance in super strategies for these individuals.
Their partners will also get tax offsets if they put money into their low-income spouse’s super. The Government will increase access to the low income spouse superannuation tax offset by raising the income threshold for the low income spouse to $37,000 from $10,800. The low income spouse tax offset provides up to $540 per annum for the contributing spouse and is subject to other qualifying criteria.
This measure would provide more incentive to make spouse contributions in order to meet spouse retirement goals, and will be especially important to address equalisation issues, especially in light of the limit on balances permitted to fund retirement phase for each individual. Spouse contributions are also a tax-effective way to fund insurance premiums being deducted from a spouse’s account and/or offset deterioration of a spouses superannuation balance due to insurance premiums.