00:00:00:00 - 00:00:31:23
This podcast is for education and entertainment purposes. It's not financial advice and doesn't take into account your objectives, financial situation or needs. You should consider if the information in this podcast is appropriate for you and contact a professional financial adviser. If you are seeking financial advice. Hello and welcome to episode three of Women's Financial Empowerment, a podcast series from Health Professionals Bank, where we look at practical ways women can build their financial well-being and schools some big financial goals.
00:00:31:26 - 00:00:54:25
But before we get started, we'd like to acknowledge the traditional custodians of the country throughout Australia and their connections to land sea and community. We pay our respects to their elders, past, present and extend that respect to all Aboriginal and Torres Strait Islander peoples. In our last episode we did a deep dive into everyday money management, including how to do a budget and start a savings plan.
00:00:54:28 - 00:01:19:17
Today we'll be looking at work and money. It's a really interesting topic. We'll be getting into women's income. So how women on average are less than men and what we can do to even up our financial footing. How raising a family can affect a woman's professional trajectory and their super as a result. And a little bit on the not so exciting but really important topic taxes.
00:01:19:22 - 00:01:44:19
Before we get going, let me introduce to you my co-host for this series, Betsy Westcott. Betsy is a financial wellbeing coach with qualifications in financial advice, home lending and money coaching. Her biggest wish is that every Australian enjoys financial well-being and her whole career has been about helping Australians be more informed and make better financial decisions about money.
00:01:44:21 - 00:02:11:16
Betsy, it's always a pleasure to speak with you. How have you been? I have been very well and I'm very excited about this topic. It's particularly relevant for me right now. I'm in my third trimester of my second pregnancy, so this is all very real. And I think what I'm most excited about is that I know we've been touching on the challenges that women face when it comes to achieving financial wellbeing, and that can feel a little bit depressing.
00:02:11:16 - 00:02:39:27
And I remember when I was a younger, starry eyed professional starting out, I thought, you know what, that's not going to happen to me. I'm going to be creative. But the reality is, is these these challenges are there, but there's certainly challenges that you can overcome with awareness, with some mindful practices. You can really eliminate these these the negative impacts of these by just taking early steps and taking action early to offset them.
00:02:39:29 - 00:03:01:02
So that's what I want people to take away. Even though these challenges are there, you can overcome them, you can achieve not just financial wellbeing but really thrive financially that is within your control. And it doesn't matter how much money you're earning, it's what you do with it that really makes a difference. I totally agree an early is better, but we can start at any time, right?
00:03:01:03 - 00:03:23:24
Yes. I think there's an old Chinese proverb: The best time to plant a tree was 20 years ago. Next best time is today. And that applies for money as well. You know, if you could get started when you were three investing, then amazing. But that's probably not going to happen. But if you can just get started today and it's just 1% is small little actions that add up to being a really big difference on your wellbeing.
00:03:23:24 - 00:03:47:01
And that's what we talked a lot about in the last series was about the every day and how important that is. But we've got a jam packed episode today because this is a really interesting topic, so let's get into it. When we come back, we'll look at some of the reasons why women earn less than men on average and some ways women can even that playing field.
00:03:47:03 - 00:04:09:14
Now, Betsy, as we've mentioned in other episodes, women in general still earn less than men over their lifetime for a whole range of reasons. Should we perhaps start there with the income issue that we've touched on earlier? Yeah, I think that's a really great place to start. So I think firstly it's worth flagging that some of the issues unique to the work pattern choices that we make.
00:04:09:14 - 00:04:35:06
And again, I'd like to use the word choices. I mean, some things we can't negotiate, many yet to be able to bear children. But you know, it really comes down to the dynamics of your relationships and the choices that you make around how and when you work. And so whether that's casual contract work part time or full time, and these decisions really can influence your income earning potential over your lifetime.
00:04:35:09 - 00:05:01:16
Now, as we have said, there are issues around the gender wage gap. So even if you're working full time at the current rate of improvement, it's estimated it's going to take about 24 years for us to close that gender wage gap. Happy. Happily, it is coming down, but there's still plenty of work to do. So as of May 20, 23, and I think we mentioned this on an earlier episode, but the gender pay gap for ordinary full time earnings is around that 13% mark.
00:05:01:18 - 00:05:29:16
And so the gender Equality Agency, which looked at the total remuneration, so not just like the ordinary time earnings, but it also looked at bonuses and overtime actually found the gender wage gap is bigger with the total remuneration gap being around 21.7%. So for every dollar an average man makes, a woman earns about $0.78 and over the course of a year that difference could add up to $26,393.
00:05:29:18 - 00:05:55:06
Multiply that over a 40 year career. We're talking up to a million bucks. Big bucks. Big bucks and a big gap. Yeah, and there's quite a few reasons for these stats. So sometimes it is discrimination, both conscious and unconscious. Other times it's a little bit more complicated. So like we mentioned that female dominated industries pay lower wages Overall, women are less likely to apply for better jobs in promotions.
00:05:55:11 - 00:06:20:00
They only do so if they made 100% of the criteria. This this kind of mines that we have of needing to kind of take all the boxes, whereas, you know, generally speaking, the boys are happy to just make 60% less. So I think we need to take a leaf out of their book a bit. Women may avoid applying for some more senior roles because they're concerned around balancing the responsibilities and time commitment of against that.
00:06:20:03 - 00:06:39:17
That would have to adhere to in their role against the caring responsibilities for their family. And then, of course, women on average work part time more often. And because of this, they may not be considered for more senior roles that earn more money. So with all of this in mind, women are a little bit behind the eight ball when it comes to income.
00:06:39:17 - 00:07:03:28
But like I said in the intro, let's look at what we can do about it. So first of all, start thinking about your income frequency. So health professionals often have to contend with unusual working arrangements. So shift workers might have unpredictable income, and part time workers, for example, may be potentially earning less because they're working less. You'll need to budget accordingly to accommodate this.
00:07:04:02 - 00:07:25:04
A hot tip is to catch up on our previous episode for budgeting tips, and you can also search our Better Money Management podcast on our health professional bank website. Now, some people find having a little side hustle can bring in an extra source of income and also be an enjoyable distraction from their day job. I'm going to admit I had a little side hustle previously.
00:07:25:04 - 00:07:45:28
What was that? Well, my financial coaching business. And then it became my main gig. So you never know where it might take you If you do work for the not for profit or public sector, you could also reduce the amount of tax you pay thanks to salary sacrificing options which lets you pay for some expenses out of pretax income, reducing your taxable income for the financial year.
00:07:45:28 - 00:08:11:13
We're going to be talking more about this towards the end of this episode. And income also affects your superannuation. Your employer is responsible for putting a percentage based on your ordinary time earnings into your super account. And because it's based on percentages, the higher income, the higher your super contributions are. That's right. Although you can also top up your super with voluntary contributions if you can afford to do so.
00:08:11:16 - 00:08:35:12
Okay. Well, hold that thought, Betsy, because we're all will be looking at super in more detail after the break. We'll talk about how your super is calculated, what happens if you take a break from work and some of the other issues around super will be back soon. So Betsy, in this part of the podcast will be talking about super.
00:08:35:15 - 00:08:57:20
Now that's money. Your employer puts into your superannuation account to help you fund your retirement. Now everyone has heard of super, but there are a few things our listeners may not be aware of. Yes, I feel like super is largely misunderstood and slightly ignored by most of the population. So let me break down what super is and why you should care about it.
00:08:57:23 - 00:09:20:22
So as you mentioned, super is a paid as a percentage of your ordinary time earnings of the money that you earn in 2020 for the superannuation guarantee, which is the minimum amount your employer should pay on your super is 11%. Now that's going to go up to 11.5% from July 2024. And then increase again the following financial year to 12%.
00:09:20:22 - 00:09:44:09
So your super is getting a pay rise in the coming year. Yay. Now it's important to understand what ordinary time earnings is, but a jargon, isn't it? So if, for example, you're a health care worker on a night shift, ordinary time earnings and the percentage of super your employer pays does not include your shift loadings, for example, and it doesn't include overtime.
00:09:44:09 - 00:10:13:20
So if you've been paid overtime, that's not included when calculating the percentage value of what your super contributions. Wow. That's- that's a surprise. I know you think it's like on all the money you earn, but yeah, you really need to look at the definition of ordinary time earnings. Your employer keeps the money for your super set aside and pays it into your superannuation account, typically quarterly, although some will do it monthly or whenever you get paid, but it has to be at least quarterly.
00:10:13:22 - 00:10:35:05
Interestingly, however, that's going to change in 2026 or in a few years time. Employees will have to pay super into the account alongside your regular pay. So if you get paid fortnightly, your employer will be obliged to pay your super fortnightly. That's beneficial because it's getting invested sooner and then has more time to grow and compound, so it'll boost your balance overall in time.
00:10:35:10 - 00:11:04:13
So for a 25 year old on a median income, that could mean an additional $6,000 when you retire. And that's not putting any extra money in. It's just by getting it paid more frequently in this scenario, getting it paid into your super fortnightly. And that highlights a really interesting point that I think listeners should be aware of, which is that super greatly benefits from regular contribution, even if you're not working regular hours and maybe putting in less each cycle.
00:11:04:19 - 00:11:28:07
Just making regular contributions and regular payments has an outsize impact on your balance at retirement. Actually, can I ask you a question? Yes, I think it's a hot topic in my social circle at the moment, but I am a little bit older than I'd like to admit, but I think that's part of the problem. We don't talk about super much when we're young and we think it's a long time away.
00:11:28:07 - 00:11:58:27
But that point that you just made is really important. The early you start making additional contributions yourself, the better it's going to be in the long term. Absolutely. If you can afford to make those extra contributions when you're younger, it means that it's being invested earlier and it's got more time for those investments to compound and grow. So by contributing a little bit now can have a huge impact rather than doing what most people do, which is they sort of get to their forties, maybe fifties, and go, I think I'd like to retire.
00:11:58:29 - 00:12:21:00
And then they have to make big contributions and adopt really significant strategies to try and like boost their super in a short period of time. So a little bit goes a long way. It makes a big difference. And that's that's something that's worth looking into. Absolutely. And it removes the panic that you get when you grow a little older and realise you don't have as much as you'd like.
00:12:21:02 - 00:12:42:24
So now remember, if you are employed as an independent contractor, if you're a sole trader like myself with an ABN, or if you send in tax invoices, then you are responsible for making those super contributions, your employer not doing it right because you're independently employed. So that's an additional thing that you really need to be conscious of. Yeah.
00:12:42:24 - 00:13:07:27
So if you're an employee, if superannuation is paid for you under the super guarantee, if you are self-employed, you need to DIY their super payments and and that's something to be really mindful of. I see it a lot in my field of work that people really focus on building up their businesses and putting all the money into that, but forget to contribute to the superannuation balance and I'm missing out on all those years of investment returns and growth.
00:13:07:27 - 00:13:28:16
So it's definitely something that you want to think about prioritising If you're self-employed. Now, some of our listeners may have spotted a pretty glaring challenge here, and that's in regards to raising a family. So when you're not in paid work, there's no super going in from your employer and that can really affect your super balance over the years.
00:13:28:19 - 00:13:46:25
And we'll cover this in more detail in the family finance episode. We're going to get into some of the numbers and make it really tangible. But here's some tips to consider to cover this gap. If you are taking a career break, whether it's to raise a family or even just a little sabbatical potentially. So how can you offset these gaps?
00:13:46:25 - 00:14:12:22
So first of all, salary sacrifice, which we talked about in our last episode, how I used salary sacrifice through my twenties to offset career breaks in my thirties, You can make voluntary contributions. I say you might get a tax return or some sort of financial windfall if you don't need the money right now or any time soon. Then thinking about how you might contribute it to your super to cover those periods of unpaid work is not a bad idea.
00:14:12:24 - 00:14:33:24
And of course, if you're partnered and you're not earning a lot or not working at all, your spouse can also make contributions to your super and get a little tax offset for doing that. That's really useful information between. And I think it continues to reinforce what we've been talking about, which is actually planning for those life events becomes really critically important.
00:14:33:24 - 00:14:54:21
So it doesn't have to be a big gap. Yes, in the longer term. And now we're coming to the final part of our work and money episode when we'll be talking about taxes, repaying tuition debts, and how eligible essential workers can use a salary sacrifice option to reduce their taxable income a bit. See, I'm really interested in that.
00:14:54:21 - 00:15:22:18
I think our listeners will be too. So we'll be back with all of that after the break. I've been talking to financial wellness coach Betsy Westcott in this episode about women work and money. We've mentioned income and super. And now we'll wrap up with a quick chat about taxes. Betsy Not my favourite topic, but an important one like death and taxes.
00:15:22:18 - 00:15:50:28
As the saying goes, that's one of life's inevitabilities. I like to think about taxes, like paying the yearly subscription to live in Australia. In common with that, the free trial version now is something you need to be mindful of as you progress through your career. Is your tax obligations, especially for any of our listeners who've studied and still have a help or hex debt or vet student loan, for example, Those education loans can be a little bit of a drag on your finances.
00:15:50:28 - 00:16:12:16
I remember when I paid mine off, it was like getting an instant pay rise. It feels like an achievement, doesn't it? And so if you're trying to put together a home loan deposit or reach another savings goals, it really can feel like this. This loan is holding you back. So things you need to know include the fact that your education debts are repaid through your taxes.
00:16:12:18 - 00:16:37:19
And these debts, they don't earn interest, but they do increase in line with inflation. So if inflation's high in a particular year, then you might see a bit of a jump in the balance of that debt. The repayment bill becomes a higher percentage of the debt as you move into higher income bracket. So if you get a pay rise and jump from 100 to 120000, the amount that you're contributing to repaying that loan back will also be a little bit higher.
00:16:37:22 - 00:17:08:08
And you need to be prepared. So you potentially consider making voluntary repayments on these loans because the more that you can pay involuntarily, the quicker you're going to repay this debt and the sooner you can be debt free, which is always a nice thing. So paying it off early is going to reduce your overall debt burden. And if you are approaching retirement and you still have one of these loans hanging about, you really want to think about how can I pay this off before I retire and before I stop earning income?
00:17:08:10 - 00:17:32:19
So is there anything we can do to reduce our taxes? This is always everyone's favourite question, isn't it? And look, yes, there is. Let's talk about the legal ways that you can. Of course. I always mean legal ways. Yes, legal ways. So there's definitely a few avenues you can explore. But if you're listening right now with pen and paper hoping I'm going to reveal how to, you know, niches off a huge tax refund.
00:17:32:19 - 00:18:02:15
I'm sorry, dear listeners, it's not that easy. The reason being is that your tax and how much you pay really depends on your personal circumstances. So as with a lot of things, when it comes to making financial decisions, it's good to get advice from a suitably qualified professional like your accountant or other qualified tax professional so you really understand the ins, the outs and the decisions that you're making and how they're going to impact your personal tax situation.
00:18:02:18 - 00:18:24:15
So just to stress, what I'm going to talk about is an advice is just some ideas that you might want to raise with your tax advisor to find out if they're appropriate for you. Alright, so not advice, but some really good tips and tricks. What are the hints that we can explore? Yes. So first of all, question whether enough tax is being taken out of your pay.
00:18:24:15 - 00:18:53:19
You don't want to get a surprise tax bill at the end of the year, so making sure the right amount is being deducted each paycheck is is a good, prudent approach. Now, it also might pay to think about, if you want to make a charitable donation and whether there are any tax deductions available because of that donation. As a health professional working with an accountant that understands the tax claimable for your industry is really valuable advice.
00:18:53:21 - 00:19:15:14
And so it really pays to work with an accountant who understands your profession and industry. Of course, keeping your receipts is really important in case you get audited by the tax man. And the final thing I would say is be proactive. A lot of people wait until about May to go and get tax advice, but the financial year is almost over by then.
00:19:15:14 - 00:19:44:07
It's a little bit late. So I would be going and having a chat with your accountant nice and early and saying, What can I be doing this year to optimise my tax position? And then you've got time to actually execute on that advice. Now, if you are an eligible essential health worker, you also have an option to use salary sacrifice to pay some expenses out of your pretax income, and that will reduce the overall taxable income for the year as well.
00:19:44:14 - 00:20:06:07
So keep that in mind. I'm really interested in salary sacrifice because I think it can be an opportunity, but it's really confusing for a lot of people. Can you explain it for us? Yeah. Salary, sacrifice. It sounds like you're giving something up, but actually it can be really beneficial in terms of the overall amount of tax you pay and some of the financial benefits you can have.
00:20:06:07 - 00:20:32:21
So it's available for eligible health workers who are employed by a public or a not for profit hospital charity or other not for profit organisation, or if you work for an ambulance service. So check with your employer and your accountant to see, first of all, are you eligible to use this salary sacrifice Legally, you can sacrifice up to about $9,010 each year and salary sacrifice.
00:20:32:25 - 00:20:54:24
Sometimes it's called salary packaging, same, same two different name, same thing. And it lets you use some of your before tax salary to cover expenses such as home loan repayments. A car loan, childcare fees, health insurance premiums and some voluntary super contributions. So you're using pretax dollars to pay for those things, which means more money in your pocket at the end of the day.
00:20:54:24 - 00:21:19:01
And most people don't realise that you can actually, you know, if you're a health worker in the areas that you talked about, actually get your home loan repayments, your salary sacrifice was an opportunity. That's the perfect word. It's a great opportunity. And again, there's calculators available online or your accountant can show you the financial benefits of making those decisions and help you make a really informed decision.
00:21:19:03 - 00:21:37:02
And because these payments come out of your salary before you've paid tax on it, this reduces your total salary for tax purposes, which means your taxable income is lower and as a result you pay less tax, which everyone loves. So that should be about it. I think we've done a fairly comprehensive coverage of taxes. What do you think?
00:21:37:03 - 00:21:58:03
I think so too, and I think that's it for this episode to that time already. Okay. Well, that went fast, but it was interesting. So thank you so much, Betsy, and thanks again for your time. Thanks, Nicole. And thank you for joining us, too. We hope you enjoyed this episode of Women's financial Empowerment. Now, our next episode is a really important one.
00:21:58:06 - 00:22:28:13
It's looking at money and relationships. We'll be discussing some common money myths when it comes to love and relationships, the conversations you should be having with your partner and we so often don't. And how to make those conversations really productive. And the most important thing, which is in maintaining your own financial independence. I'm Nicole Banks and I'll catch you next time.
END OF EPISODE
