Adding Superannuation Guarantee (SG) contributions to the Commonwealth Carer Payment would be a huge boost for home carers, and could be done at a cost-neutral basis to the budget, KPMG Australia proposes in a new paper in its gender equity series.
KPMG also renews its call for SGs to be applied to Commonwealth Paid Parental Leave (PPL), which would be a major step towards closing the gender super gap.
The paper, Towards Gender Equity in Retirement, finds that recipients of the Carer Payment – over 70 percent of them women – who provide constant care to someone who has a disability, severe illness or is frail aged, often have to leave the workforce for years, leaving them with minimal super balances.
For a person who began providing care at 35 years of age and continued to do so and receive the Carer Payment for 15 consecutive years thereafter, the addition of SG contributions to the Carer Payment could be expected to boost their superannuation balance at retirement age by $123,000. KPMG economic analysis finds that this could be achieved at a budgetary cost of $45,500 in real terms.
Linda Elkins, KPMG Australia Head of Superannuation, said: “Not only would KPMG’s proposal properly recognise and value the role home carers play – and help close the gender superannuation gap, given most of them are women – but it could be done with a cost-neutral, or even positive, impact on the Budget over time by giving incentives to people to take on caring roles. It would be a huge boost to people who help 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.”
All recipients of the Carer Payment also receive the Carer Allowance and the Carer Supplement, totalling $29,624 per annum, compared with the $42,255 per annum received by a worker on the minimum wage. Where formal care involves the use of government-funded facilities such as residential aged care buildings and hospitals, the cost gap is even greater.
But if the addition of SG contributions to the Carer Payment were to incentivise an increased number of informal carers, KPMG estimates this policy could result in net budgetary savings. Further savings might also emerge from a potential reduction of Age Pension payments, resulting from the boost to carers’ superannuation balances.
The proposal complements KPMG’s 2022 recommendation of a Carer’s Income Tax Offset (CARITO), a tax credit to be offset against personal income tax payable by a carer upon returning to the workforce, proportionate to the total amount of unpaid caring work performed prior to returning to work.
The CARITO would provide incentives for carers to return to the workforce, where they are able to do so, by offering them a credit against income tax payable that reflects the time and effort they have devoted to unpaid caring work.
However, KPMG also recognises that many carers have their hands full with their caring responsibilities and will not be able to re-enter the workforce. This is where the new proposal to apply SG being applied to the carer’s payment will come in.
Linda Elkins said: “Many of KPMG’s gender equity recommendations – for example on better childcare – have been about facilitating a return to work for women and restoring some of the financial benefits they have missed out on. But some have no choice but to remain out of the workforce and and our new policy will help to support them.
“It is a highly equitable policy, since recipients of the Carer Payment must satisfy a means test and therefore are on low incomes. People who carry out unpaid caring work 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.”
Cost
The report finds that, based on the 2023-24 budget papers, the initial annual cost of adding SG contributions to the Carer Payment at a rate of 12 percent would be around $944 million with the cost projected to reach $1.1 billion in the 2026-27 financial year
Each person receiving the Carer Payment contributes to net budgetary savings. If the people they look after were instead placed into formal care, such as high-care aged care facilities for frail aged people and NDIS service provision for people with a disability, the cost to the federal budget of that service provision would rise.
Together, the recommendations to add SG to the Carers Payment and PPL form part of the suite of policy proposals KPMG has put forward in a series of papers going back to 2018 with the aim of reducing gender inequality in pay, incomes and super.
Linda Elkins said: “KPMG continues to believe that since the Commonwealth pays PPL to eligible workers – and compulsory super contributions rightly form part of remuneration – then it follows logically that the Commonwealth should make SG contributions under its PPL scheme. We renew our call for the Government to include SG contributions in PPL in future budgets.”
Read the full paper Towards Gender Equity in Retirement, the 11th in KPMG’s gender equity series.
All previous papers in the series can be found at: Advocating for our community
For further information
Ian Welch
KPMG Communications
0400 818 891
iwelch@kpmg.com.au
