Single Mums lose thousands through superannuation co-contribution rules

 By Helen Said, semi-retired single mum

 

Single mums need superannuation to look after ourselves later in life. We are less likely to own our own homes, and more likely to become homeless if we don’t have retirement savings to fall back on.

Unfortunately, some Australian Tax Office superannuation rules are stacked against single mothers.

The government offers low-income earners up to $500 per year, as a superannuation co-contribution, until we are 71 years old. If single mums were given this money, we could retire with a nest egg of tens of thousands of dollars or more.

But most single mums will never get this money, at least not while we are bringing up children. To get $500 a year from the government, paid into your superannuation account, you need to lock away $1000 every year. When you are struggling to pay rent and put food on the table for your children, how can you lock away $1000 each year for your old age?

How it works: if you earn less than $47,488 this financial year, the government will put 50c into your super account for every dollar of personal super contributions that you put in. The government will give you a maximum of $500 per year if you lock away $1000 or more of your take home pay in your superannuation account. (Those earning between $47,488 and $62,488 can still get government co-contributions, but at a lesser rate.)

How single mums lose thousands: Let’s say, Annabel is a mother of two children with a part time job earning less than $47,488 per year. Annabel has a partner who works and helps pay bills. So, Annabel can afford to lock away $1000 per year in her retirement fund. Each year, when Annabel lodges her Tax Return, the government sees that she put in $1000 of personal superannuation contributions, so the government puts another $500 into her superannuation fund. Twenty years later, Annabel’s children have grown up and she has $10,000 of government co-contributions sitting in her retirement fund, along with her personal contributions and her Employer Superannuation Guarantee contribution, plus the interest earned on each of these.

Now compare this to say Belinda, who is also a mother of two children earning less than $47,488 per year. Belinda doesn’t have a partner to help pay the bills. Belinda is struggling financially and cannot afford to lock away any money in her retirement fund. Each year, when Belinda lodges her tax return, the government sees that she did not make any personal superannuation contributions, so the government won’t put anything into her superannuation fund either. Twenty years later, Belinda’s children have also grown up but she doesn’t have any government contributions or personal contributions in her superannuation account; she only has her Employer Superannuation guarantee contribution and interest.

Clearly this is unfair. The government only pays low-income earners super if they have money to spare. If you can afford to lock away $20,000 for retirement, during the 20 years you spend bringing up your kids, the government will give you an additional $10,000. But if you are struggling to bring up kids alone, and cannot afford to lock up your money in a superannuation fund, the government won’t put anything in there either.

The government argues that their co-contribution rules are encouraging people to take money out of the bank and put it into retirement savings. But most single mums keep money in the bank to pay for rent, food, bills, medical expenses, transport and school expenses. We don’t have a choice about whether we keep it in the bank or put it into a super fund. Instead of helping struggling single mums to build up our retirement savings, the government punishes us by not giving us the $500 per year that it gives to other workers who can afford to lock up some of their money until retirement.

Single mums are the hardest working people in Australia. We deserve security in our old age. Every low-income earner should get the full government superannuation co-contribution.