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Published online by Cambridge University Press: 24 January 2025
The current arrangements for taxation of superannuation in Australia are directed to ensuring that individuals make more adequate provision for their retirement than has occurred in the past. The use of tax concessions to do this obviously involves a cost to the public revenue. The use of tax concessions in relation to superannuation is both inefficient, because it provides concessions to those who would make provision for their retirement even without the concessions, and inequitable, because it provides the greatest concessions to those at the upper end of the income scale. Taxpayers who are unlikely to access the concessions fully are those who do not follow the traditional work pattern of a substantial unbroken period of employment. The aim of this article is to demonstrate that, at the turn of the century, many women have work patterns that differ from the traditional model and that the current arrangements for superannuation, which form a major component of the government's retirement incomes policy, are inequitable and should be changed.
1 The age pension qualifying age for women has progressively increased from 1 July 1995. From 1 July 1997, the qualifying age for women has been increased to 61 and will inrrease by an additional six months every two years until it reaches 65 in July 2013.
2 J Disney, Introduction in J Disney and R Krever (eds), Superannuation, Savings and Taxation (1996) (Centre for International and Public Law, Australian National University and Taxation Law and Policy Research Institute, Deakin University) at 1.
3 Commonwealth Parliament, Senate Select Committee on Superannuation, Super and Broken Work Patterns (1995) para 5-15.
4 Government's response lo Sena le Select Committee's 15th and 17th reports, 25 March 1999.
5 The government released a position paper in November, 1998 entitled “Super and Family Law” and has now promised legislation to enable splitting of superannuation entitlements on divorce: Joint Press Release by the Attorney-General and the Minister Assisting the Prime Minister for the Status of Women, 30 March, 1999. For a discussion of the difficulties of working out how such a split might be effected, see J Millbank, “Hey Girls, Have We Got a Super Deal for You: Reform of Superannuation and Matrimonial Property” (1993) 7 Aus Jo of Fam Law 104. The Family Law Legislation Amendment (Superannuation) Bill 2000 was introduced into Parliament on 13 April 2000, but had not been passed at the date of writing.
6 For a discussion of the issues, see R Clare, “Women and Superannuation” (1994) 64 Australian Accountant 34.
7 Mattila, J, “Women and Retirement” (1990) 15 LSB 41Google Scholar and Fletcher, E, “Women with Family Responsibilities Need Not Apply” (1996) 21 Alt LJ 230Google Scholar.
8 Australian Treasury, Reform of the Australian Tax System, draft White Paper (1985) ch l. The paper also identified a number of additional factors that must be considered in evaluating a tax system, in particular, the Australian tax system. Those factors included the need to prevent tax avoidance and evasion, the need to recognise the impact of inflation on the tax system, the need to review government spending programs in the tax system, the interaction of tax and the social security system and harmonisation of Federal, State and local government taxes ( at paras 1.11-1.20).
9 Ibid, para 1.2.
10 Ibid, para 1.7.
11 Ibid, para 1.8.
12 Ibid, para LI.
13 Taxation Review Committee (the Asprey Committee), Full Report (1975) at 12.
14 This term refers to the practice, where a change is introduced into the legislation, of maintaining the old position for benefits that have accrued to that date. For example, all termination payments which relate to service prior to 1 July 1983 are still taxed according to the rules which applied at that time, that is, only 5 per cent is included in assessable income and taxed at the taxpayer's marginal rate.
15 Commonwealth Parliament, Senate Select Committee on Superannuation, Super system survey—a background paper on retirement income arrangements in twenty-one countril's (December 1991).
16 Statement by Treasurer, “Security in Retirement” (30 June 1992) at 15.
17 Award superannuation had been implemented progressively since the 1986 and 1987 National Wage Case decisions, but problems of employer compliance were well documented: Commonwealth Parliament, Senate Select Committee on Superannuation, Safeguarding Super: The Regulation of Superannuation (First Report 1991).
18 Treasurer, , “Super Guarantee Levy Paper” (December 1991)Google Scholar.
19 Superannuation coverage increased significantly as a result of award-based superannuation but, as at 1991, only 80 per cent of full-time and 42.3 per cent of part-time employees were covered by snperannuation: Australian Burean of Statistics, Employment Benefds Australia (July 1991).
20 The operation of the system will be affected by the choice of superannuation fund rules which were intended to come into operation from 1 July 1999. The legislation giving effect to this proposal is still before the Senate at the time of writing.
21 As to what constitutes a “complying fund”, see Superannuation Industry (Supervision) Act 1993 (Cth). Basically, the fund must be resident and must meet the requirements of that legislation including the “sole purpose” test (s 62). This test provides that the fund must be maintained for the provision of retirement benefits to members. From 1 July 1994, the fund must ensure that contributions are fully vested in the employees (that is, not subject to conditions) and are compulsorily preserved (that is, are kept in the fund until retirement).
22 From 1 July 1997, financial instihttions have been permitted to provide such accounts that are intended to provide a low cost alternative to superannnation funds. These accounts are regulated under the Retirement Savings Account Act 1997 (Cth).
23 Small Superannuation Accounts Act 1995 (Cth). It is expected that these accounts will eventually be phased out and replaced by the RSAs (see above n 22). No legislation has been introduced at the time of writing.
24 Rising to 8 per cent for 2000-2001 and 9 per cent for the year 2002-2003 and subsequent years.
25 Defined to include commission and to exclude fringe benefits: Superannuation Guarantee (Administration) Act 1992 (Cth), s :ll.
26 For 1999-2000 the maximum contribution base is $25,240 per quarter: Superannuation Guarantee (Administration) Act 1992 (Cth), s 15.
27 Superannuation Guarantee (Administration) Act 1992 (Cth), s 12CI).
28 The Commonwealth is not liable to pay the superannuation guarantee charge. Commonwealth authorities are generally subject to the Act: Superannuation Guarantee (Administration) Act 1992 (Cth), ss 5 and SA.
29 Superannuation Guarantee (Administration) Act 1992 (Cth), s 12(1).
30 Superannuation Guarantee (Administration) Act 1992 (Cth), s 12(2)-(11).
31 Income Tax Assessment Act 1936 (Cth), ss 221A-221Y. From 1 July 2000, those provisions will be replaced by the “pay as you go” (PAYG) provisions in Sched 1, Taxation Administration Act 1953 (Cth). Under these provisions, a payer will be obliged to withhold tax from payments to an “employee” or where the payee does not quote an Australian Business Number (ABN).
32 Superannuation Guarantee (Administration) Act 1992 (Cth), s 12(11).
33 Currently $450 per month: Superannuation Guarantee (Administration) Act 1992 (Cth), s 27(2). Other exclusions are: employees aged under 18 years of age who are not working full-time; employees in their capacity as members of the Defence Reserve Forces; and employees who are aged 70 years or over. Also excluded are non-resident employees paid solely for work undertaken outside Australia and resident employees who are employed by non-resident employers and are paid solely for work undertaken outside Australia: ss 27-29.
34 The tax legislation is progressively being re-written and is currently contained in the Income Tax Assessment Act 1936 (Cth) (ITAA 36) and the Income Tax Assessment Act 1997 (Cth) (lTAA 97). When the re-write is complete, the 1936 Act will cease to have operation.
35 Superannuation Contributions Tax (Assessment and Collection) Act 1997 (Cth). The government also introduced a termination payments surcharge: Termination Payments Tax (Assessment and Collection) Act 1997 (Cth).
36 See Raymor Contractors Pty Ltd v FCT (1991) 91 ATC 4259 where no deduction was allowed as the purpose of the fund was held to be the provision of low interest loans to the employer rather than making provision for superannuation benefits.
37 Although the benefits may be paid to a dependant if the employee dies before or after becoming entitled to receive the benefits: ITAA 36, s 82AAC(l).
38 ITAA 36, ss 82AAA-82AAR. This includes contributions made under the Superannuation Guarantee (Administration) Act 1992, but not the amount of any charge the employer becomes liable to pay: s 51(9) ITAA 36. A deduction is not allowed under any other provision of ITAA 36 or ITAA 97 in respect of employer contributions: ITAA 36, s 82AAR. However, a contribution made where there is no employment relationship (for example, on behalf of an independent contractor) may be deductible under ITAA 97, s8-1.
39 ITAA 36, s 82AAA.
40 As to what constitutes a complying superannuation fund, see above n 21.
41 TTAA 36, s 82AADA.
42 ITAA 36, s 82AAD.
43 ITAA 36, s 82AAE.
44 See the exclusions from the definition of “fringe benefit” in Fringe Benefits Tax Assessment Act 1986 (Cth), s 136(1).
45 TTAA 36, s 82AAC(2A). The limits for 1999-2000 are $10,929 for employees aged less than 35 years, $30,356 for employees aged 35-49 years and $75,283 for employees aged 50 years and over. The limits are indexed for subsequent years. There is no limit to the amount of deductible contribution made to a non-complying fund: s 82AAE.
46 Calculated by multiplying the number of “full year employee positions” by the relevant amount (eg, $27,170 for the 1996-97 y0ar): ITAA 36, s 82AAC(2D).
47 Taxation Laws Amendment Act (No 2) 1997 (Cth).
48 See text above under heading The superannuation guarantee scheme.
49 lTAA 36, ss 82AAS-82AAT. There is also a requirement to provide a notice in the prescribed form to the fund trustee or RSA provider stating the intention to claim a deduction in respect of the contributions: s 82AAT(1A) and (lCB).
50 ITAA 36, s 82AAT(2A). From 1 July 1994 those limits are the same applying under s 82AAC(2A) in relation to contributions by an employer on behalf of an employee: s 82AAT(2A).
51 ITAA 36, s 82AAS(2).
52 See the discussion of who is an “employee” under the Superaimuation Guara11tee (Administration) Act 1992 (Cth) above and below under the heading Women and superannuation.
53 ITAA 36, s 82AAS(4)-(l0).
54 Including persons who are not employees for the purposes of the super guarantee legislation, such as taxi-drivers: see De Luxe Red and Yellow Cabs (1998) 98 ATC 4466.
55 JTAA 36, s 82AAS(3). This includes multiple periods of employment. See Taxation Ruling TR 96/25.
56 The introduction of the Superannuation Guarantee Charge means this is extremely unlikely but see Taxation Ruling TR 96/25.
57 Except in the circumstances described above in relation to persons who are substantially self-employed.
58 See the discussion above under heading The superannuation guarantee scheme.
59 ITAA 36, s 159S2.
60 ITAA 36, s 159SZ(l)(a).
61 This is based on 10 per cent of maximum rebatable contributions of $1000 paid to any complying superannuation fund or RSA.
62 ITAA 36, s 159T.
63 ITAA 36, s 6(1). A de facto spouse is one who lives with the taxpayer on a genuine domestic basis as the husband or wife of the taxpayer.
64 ITAA 36, s 159TC.
65 This is based on 18 per cent of maximum rebatable contributions of $3000 paid to any complying superannuation fund or an RSA.
66 See, for example, Australian Financial System (1981), Final Report of the Committee of Inquiry (JK Campbell, Chairman).
67 McClelland, A and Krever, R, “Social Security, Taxation Law, and Redistribution: Directions for Reform” (1992) 30 Osgoode Hall LJ 48 at 62Google Scholar.
68 ITAA 36, s 274(1). This includes contributions under the Superannuation Guarantee (Administration) Act 1992 (Cth), s 65.
69 Some income may be excluded from assessability because, for example, it accrued prior to 1 July 1988.
70 As to what constitutes a complying fund, see above n 21. All other funds are non-complying funds and are subject to tax at the rate of 47 per cent.
71 JTAA 36, s 278(1).
72 The government has recently introduced legislation which effectively reduces the tax rate payable by superannuation funds on capital gains from 15% to 10%: New Business Tax System (Integrity and Other Measures) Act 1999. See ITAA 36, ss 302-315 as to the general treatment of capital gains.
73 JTAA 36, s 285.
74 lTAA 36, s 284.
75 ITAA 36, s 273. See also draft Taxation Ruling TR2000/D'I l.
76 ITAA 36, s 278(1).
77 ITAA 36, s 27A(l)(b)-Q). An ADF is an investment vehicle into which an ETP can be rolled over until retirement. The tax liability on an ETP which has been rolled over into an ADF can be deferred until it is subsequently withdrawn from the ADF.
78 ITAA 36, s 27ACl)(a).
79 ITAA 36, s 27A(11). “Death benefit” ETPs are amounts paid after the death of a taxpayer either lo a dependant (as defined) or to the taxpayer's estate. Death benefit ETPs within the deceased's RBL are exempt from tax if paid to a dependant or as an ordinary ETP if paid to a non-dependant but subject to limits set out ins 159SA: s27AAA.
80 ITAA 36, s 27A(1)(m). The amount must, in the opinion of the Commissioner, be reasonable having regard to the nature and extent of the restraint.
81 TTAA 36, s 27A(l)(n). Again the Commissioner must consider the amount reasonable. As to what constitutes “a payment for or in respect of personal injury”, see Scully v FCT (1998) 98 ATC 4671 and the High Court decision (2000) 74 ALJR 504.
82 ITAA 36, s 27A(l)Qa). As to the tax treatment of such payments, see s 27CB. One consequence is that such payments cannot be rolled over into an ADF (see above n 77). Other exclusions include payments by way of an arm's length advance or loan (s 27ACl)(k)) and amounts included in assessable income under an employee share scheme (s 27A(l)(q)).
83 ITAA 36, s 27AA.
84 Defined in ITAA 36, s 27A(l).
85 TTAA 36, s 27B(2).
86 Defined in ITAA 36, s 27A(l).
87 ITAA 36, s 27CB.
88 ITAA 36, s 27B(3).
89 lTAA 97, Part 3, Div 152. If the person disposing of the assets is a company or a trust, the CGT exempt amount is an ETP under para (a) of the definition of ETP in s 27(1). If the person disposing of the assets is a sole trader or a partnership, the CGT exempt amount is an ETP under para Qaa) of the definition. Although the CGT exempt amount is not subject to tax, it will be included in calculating whether the taxpayer has exceeded their reasonable benefit limit: ITAA 36, s 140 ZJA.
90 See government response to Report of Small Business Deregulation Task Force, “More Time for Business” (24 March 1997). These measure have been expanded as a result of recommendation made by the Review of Business Taxation in its report “A Tax System Redesigned”, AGPS, Canberra, 1999 - see New Business Tax System (Capital Gains Tax) Act 1999.
91 ITAA 36, Part III, Div 14.
92 ITAA 36, s 27B(3) and Income Tax Rates Act 1986 (Cth), Sch 7, Pt 1, cl 1.
93 JTAA 36, s 27AA(l)(d).
94 ITAA 36, s 27C(1).
95 Formers 26(d).
96 ITAA 36, s 27AA(l)(e).
97 ITAA 36, s 159SA.
98 As to whether a payment will be from a taxed source or an untaxed source, see ITAA 36, s 27AB.
99 Senate Select Committee on Superannuation, above n 3 at 7.
100 These factors include: measures to remove formal and informal discriminatory practices, for example, removal of the marriage bar (which prevented women in certain sectors of the workforce continuing in employment after they were married) and the equal pay case; publicly funded child care; a range of training programs to assist women; an increase in part-time work and other flexible work practices; improved access to education; and a trend to having fewer children later in life: ibid at 6-7.
101 Senate Select Committee on Superannuation, above n 3 at 7.
102 Ibid at 8.
103 Ibid.
104 In 1995, 62.8 per cent of all births were to women in this age group: Australian Bureau of Statistics, Australian Vi1omen's Yearbook 1997 at 8.
105 Senate Select Committee on Superannuation, above n 3 at 8.
106 Senate Select Committee on Superannuation, above n 3 at 9.
107 Office of the Status of Women (OSW), V\lomen in Australia, 1999 (1999) at 36.
108 Ibid.
109 Ibid. A similar pattern was evident for female sole parents where the participation rates were 28 per cent and 65 per cent, respectively.
110 Australian Bureau of Statistics, above n 104 at 105.
111 OSW, above n 107 at 35.
112 Senate Select Committee on Superannuation, above n 3 at 18.
113 Australian Bureau of Statistics, above n 104 at 92.
114 Senate Select Committee on Superannuation, above n 3 at 19.
115 Ibid.
116 OSW, above n 107 at 35.
117 Ibid.
118 Senate Select Committee on Superammation, above n 3 at 8.
119 Ibid, referring to R Clare “Women and Superannuation”, selected seminar papers EPAC/OSW (August 1994).
120 Ibid at 9.
121 Ibid at 11.
122 Ibid at 11-12, referring to a study by J Begg and B Chapman, “The Foregone Earnings from Child-Rearing in Australia”, Centre for Economic Policy Research, (Discussion Paper No 190, June 1988) at ii and iii.
123 Ibid at 21.
124 Ibid at 22.
125 OSW, above n 107 at 35.
126 Australian Bureau of Statistics, above n 104 at 147.
127 Senate Select Committee on Superannuation, above n 3 at 15.
128 Australian Bureau of Statistics, above n 104 al 138-140.
129 Ibid.
130 Australian Bureau of Statistics, Average Weekly Earnings: 6302.0 (August 1999). “Ordinary earnings” refers to earnings excluding overtime.
131 OSW, above n 107 at 48.
132 MacDermott, T, “Linking Gender and Superannuation” (1997) Int Jo of Discrimination and the Law 271 at 282Google Scholar.
133 Senate Select Committee on Superannuation, above n 3 at para 3.11.
134 8 per cent of workers earn less than the SGC commencement level, most of whom are women: ibid at para 7.16.
135 From 1 July 1994, see ITAA 36, ss 140-140ZQ.
136 See the Small Superannuation Accounts Act 1995 (Clh).
137 Discussed below under heading Tax concessions are regressive.
138 Superaimuation Industry (Supervision) (SIS) Regulations, reg 7.04(1)(b)(iii) inserted in 1994.
139 Discussed above under heading Employee contributions.
140 SIS Regulations, reg 7.04(1).
141 SIS Regulations, reg 5.01(1).
142 A member is “gainfully employed” if employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment. “Full-time” means gainfully employed for at least 30 hours each week, “part-time” means gainfully employed for at least 10 hours and less than 30 hours each week: SIS Regulations, reg 1.03(1).
143 J Millbank, above n 5 at 109.
144 SIS Regulations, reg 7.04(1)(b)(i).
145 SIS Regulations, reg 7.04(1)(b)(ii).
146 SIS Regulations, reg 7.04(l)(b)(iii).
147 SIS Regulations, reg 7.04(1)(c).
148 Commonwealth Parliament, Senate Select Committee on Superannuation, Super Guarantee—Its Track Record, (February 1995) at 91.
149 R Clare, above n 5 at 35.
150 SIS Regulations, reg 7.04(1B).
151 SIS Regulations, reg 7.04(1C).
152 Senate Select Committee on Superannuation, above n 3 at para 4.12.
153 Ibid at para 4:15.
154 T MacDermott, above n 132 at 290.
155 Rosenman, L, “Superannuation and the Restructuring of Women's Work, Wages and Retirement” (1994) 76 Canberra Bulletin of Pub Admin 164 at 167Google Scholar.
156 T MacDermott, above n 132 at 290.
157 See, for example, DeLuxe Red and Yellow Cabs Co-operative (Trading) Society Ltd v Commissioner of Taxation (1998) 98 ATC 4898.
158 See Taxation Ruling TR 99/13. As noted above n 31, from 1 July 2000 the PAYE provisions will be replaced by PAYG provisions dealing with collection of tax. However, a payer will still be obliged to deduct tax from payments to an “employee” and so the Ruling will continue to be relevant.
159 Superannuation Guarantee (Administration) Act 1992 (Cth), s 12(3).
160 (1996) 96 ATC 4898.
161 (1994) 94 ATC4656.
162 Ibid at 4661.
163 Superannuation Guarantee (Administration) Act 1992 (Cth), s 12(11).
164 Superannuation Guarantee (Administration) Act 1992 (Cth), s 27(2).
165 In 1994 this was said to exclude approximately 8 per cent of workers many of whom were women: Sex Discrimination Commissioner, Superannuation and the Sex Discrimination Act: Current Status and Future Directions (1994).
166 Australian Bureau of Statistics, above n ·104 at 72.
167 T Mac Dermott, above n 132 at 287-289; L Rosenman, above n 155 at 167.
168 L Rosenman, ibid.
169 Ibid.
170 P Davidson and A McClelland in J Disney and R Krever (eds), above n 2 at 84.
171 Ibid at 87.
172 J Mack in J Disney and R Krever (eds), above n 2 at 77.
173 Ibid at 76.
174 Ibid at 81.
175 See P Gallagher in J Disney and R Krever (eds), above n 2 at 25.
176 See Grbich, Y, “Tax Expenditures as a Regulatory Tool: Targeting Superannuation Dollars” (1984) 1 Aus Tax Fomm 96Google Scholar; Krever, R, “Tax Expenditures: The Other Spending Program” (1984) 10 LSB 63-68Google Scholar.
177 See the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (Cth).
178 That is, “taxable income” calculated in accordance with the ITAA but excluding certain termination payments: Superannuation Contributions Tax (Assessment and Collection) Act 1997 (Cth), s 43.
179 Taxation Instih1te of Australia, Submission on Super Surcharge,) Taxation in Australia (Red Series) (1997) at 273; Edstein, J “Ts the Surcharge the Futme?” (1998) 27 Aus Tax Rei, 204Google Scholar.
180 See Fringe Benefits Tax Reporting Act 1999 (Cth) assented to 19 April 1999.
181 ITAA 97, s 6-5(4).
182 TR 1999/D7. This draft Ruling is consistent with earlier Superannuation Guarantee Determinations: SGD 93/ 4 and SGD 98/ 2.
183 See generally I Esdaile, CCH Journal of Taxation (June-July 1995). For the government view, see 1996 Weekly Tax Bullf.'tin [424]. From 1 July 1999, all contributions, including undeducted contributions, are to be preserved until retirement.
184 Senate Select Committee on Superannuation, above n 3 al 117.
185 D Knox in J Disney and R Krever (eds), above n 2 at 102.
186 V Fitzgerald in J Disney and R Krever (eds), above n 2 at 116.
187 Ibid.
188 ITAA 36, ss 140-140ZQ.
189 Prior to 1994, the excessive component was taxed at the taxpayer's marginal rate.
190 To determine the RBL amount of a pension, the pension must be converted into its “capital value”, ie, its equivalent lump sum value: see ITAA 36, s 14020.
191 Senate Select Committee on Superannuation, above n 3 at 51.
192 ITAA 36, s 140ZF.
193 Described as “triple-dipping” by A McClelland and R Krever, above n 67 at 947.
194 Some annuities are within the accruals provisions of ITAA 36, Div 16E. However, the Division does not apply to “ineligible annuities”, that is, annuities issued to or for the benefit of a natural person by a life assurance company or a registered organisation: ITAA 36, s 159GP(l).
195 TTAA 36, s 27H. The express reference to a supplement overcomes the result in FCT v Harris (1980) 80 ATC 4238.
196 ITAA 36, s 27H(4). In the case of a purchased annuity an amount (“the deductible amount”) is excluded from assessable income. The deductible amount is based on the “undeducted purchase price” of the annuity, that is, the amount of any contribution made by any person to obtain superannuation benefits or to purchase the annuity as is not an allowable deduction.
197 ITAA 36, ss 159SM, 159SU.
198 The election must be made in accordance with ITAA 36, s 27D.
199 ITAA 36, s 27A(l2).
200 SIS Regulations, reg 6.01(2). This includes employer contributions and now most employee contributions.
201 SIS Regulations, reg 6.01(7).
202 V Fitzgerald, above n 186 at 114.
203 Government's response to Senate Select Committee's 15th and 17th reports, 25 March 1999.
204 L Rosenman, above n 155 at 167.