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Financial Impact of Separation on Women

Separation can be an emotional roller coaster, for everyone involved. But what is the real, long-term impact on each of you?

Studies show that, unfortunately, women are more likely to be financially weakened by separation than men. But why?

There are a multitude of moving pieces in this puzzle. Generally speaking, even before you bring separation into the mix, women are a few financial steps behind men throughout their lifetime. For example, the average superannuation balan ces for women at retirement (aged 60-64) is already 20.5% lower than those for men (ATO, 2020). Further, the average full-time weekly income for women across the Australian workforce is 13.9% less than for men (ABS 2019).  Among non-public sector organisations (with 100 or more employees), the gender pay gap for full-time annualised base salary is slightly higher, at 15.5% (WGEA 2020).

After separation both parents will need to adjust their lives on some level to suit the new normal – living on a single income as a single parent. Unfortunately, for women this will be more difficult as women already earn less than men at the best of times.

Luckily, the Family Law Act takes this into consideration when the time comes to negotiate a property settlement.

Paid & Unpaid Work of Women & Men

This can be partially explained by looking at how men and women apply themselves and their time. The Household, Income, Labour and Dynamics survey indicates that in 2016, working age men spent 35.9 hours in paid employment and 13.3 hours on housework on average per week, with 5.4 of these unpaid hours being spent directly caring for children, disabled or elderly relatives. The total average amount of hours men spent working (paid and unpaid) was 53.3 hours per week.

By way of comparison, in 2016 working age women spent 24.9 hours on paid employment and 20.4 hours on housework on average per week, with 11.3 of these unpaid hours being spent directly caring for children, disabled or elderly relatives. The total average amount of hours women spent working was 55.8 hours per week.

So although women worked on average 2.5 hours more than men per week in 2016, in fact their paid work was 11 hours less than a man.

Impact of Children on Income & Superannuation

In 2018, AustralianSuper commissioned Monash University to research the gender gap in superannuation. This Report shed light on general financial differences, but also touched upon the impact of separation on women financially.

This report indicated that between 2009 and 2014, the average weekly earnings of women before the birth of a child being $945.21, however the average after the birth of a child was $475.21 –almost half of their pre-child income. Even 2 years after the birth of a child, the average weekly income for mothers is only $516.93 – still $428 less than their pre-child income.

This trend of reduced income after children does not improve for women as they have more children, with an average income of $287.89 after having a second child. It is clear from these figures that women are faced with a real struggle of reverting back to their original incomes after having children. It is not as simple as “you can earn what you earned before”, especially when it is common for the mother to be the stay at home parent who either has to reduce their hours, or cease employment all together.

The other impact children have on women, is that although they receive paid parental leave for up to 18 weeks, this does not include payments to their superannuation. The consequence of missed superannuation contributions in early or middle life shows in the subsequent loss of accumulated compound interest, and is extremely difficult to “make up” in later life.

What does this mean?

The Family Law Act takes all of the above into consideration at separation. The law requires us to look at impacting factors such as who has care of children under 18 years, whether a person’s income has been or will be impacted by the care of children, the duration of the relationship and its impact on a person’s earning capacity. These factors will be relevant when assessing the division of property after separation to compensate for the disparity in positions (usually with the woman in a weaker position) and make sure there is an equitable result.