Superannuation on Paid Parental Leave Starts July

From July next year, parents receiving government-funded paid parental leave will also receive superannuation contributions, following the passage of new legislation in parliament on Thursday morning.

The federal government has introduced this change as part of its efforts to close the superannuation gap between men and women, which is partly driven by women taking more time off work to care for children.

Under the new rules, parents with babies born or adopted after July 1, 2024, will receive an additional 12% superannuation contribution on top of their government parental leave payments, with the contributions going to their nominated super fund.

Most families will also benefit from increased childcare subsidies recommended by the Productivity Commission, including free childcare for low-income households.

The payments will be calculated and handled by the Australian Taxation Office (ATO).

Currently, couples can access up to 22 weeks of paid parental leave (PPL), paid at the national minimum wage of $915.90 per week. For children born or adopted after July 1, 2024, this will increase to 24 weeks, and to 26 weeks by 2026. Around 180,000 families are expected to benefit from this support each year.

The legislation passed smoothly through the Senate, with attempts by the Coalition to amend it being defeated.

This change follows a recommendation from the Women’s Economic Equality Taskforce, which last year urged the government to include superannuation on all forms of PPL to improve women’s financial security.

On average, women retire with about 25% less super than men, according to government data. However, a 2020 Treasury review of retirement incomes found that paying super on government parental leave would only slightly boost women’s retirement savings, adding just 0.17% to their annual income. The review identified that the broader gender gap in retirement incomes was primarily due to women earning less throughout their careers.

The introduction of super on PPL will cost the government $1.1 billion over the next four years.

While Labor had initially committed to including super on PPL before the 2019 election, it later shelved the proposal due to budget concerns. This recent legislation builds on earlier expansions to PPL, which will gradually increase the number of weeks parents can access paid leave to 26 weeks.