Table of Contents
Changes to Superannuation Payments for New Parents in Australia
From July 1, 2024, Australian parents will benefit from enhanced superannuation payments on top of their statutory parental leave pay. This initiative is predicted to add almost $3,000 to the retirement savings of new parents, significantly impacting their financial future.
Details of the Superannuation Contribution
The new scheme will apply to parents who have babies born or adopted after July 1, 2024. Under the program, eligible individuals will receive a superannuation contribution equivalent to 12 per cent of their paid parental leave, aligning with Australia’s superannuation guarantee rate. UniSuper’s senior private client adviser, Melinda Brown, highlighted that this change coincides with an increase in the duration of paid parental leave, which will rise from 22 to 24 weeks, with a further increment to 26 weeks scheduled for July 1, 2026.
According to Brown, for parents earning minimum wage—which is set to rise to $24.95 per hour (or $948 per week) on July 1—this superannuation contribution represents nearly $3,000 added to their superannuation account.
Impact on Retirement Savings
Many families will benefit from this change, with an estimated 180,000 households expected to see improved retirement savings annually. Data from the Workplace Gender Equality Agency (WGEA) indicates that 68 per cent of Australian employers provide paid parental leave beyond the government scheme, and 87 per cent of these employers also contribute to superannuation during the leave period.
For employees at companies without such provisions, Brown advises that it can be advantageous to inquire about super contributions during parental leave, suggesting that persistent requests may lead employers to reconsider their policies.
Government Contributions
The Australian Taxation Office (ATO) will automatically make super contributions for those eligible for parental leave pay, termed the Paid Parental Leave Superannuation Contribution (PPLSC). For couples sharing parental leave, both parents will receive super contributions proportional to the leave days taken. The ATO will process these contributions after the financial year ends, commencing in July 2026.
Preparing for Parental Leave
Brown emphasises the importance of parents strategically preparing their superannuation prior to taking parental leave. This includes reviewing insurance coverage, as inactive super accounts may lose their cover after 16 months of inactivity. Parents are encouraged to directly contact their super funds to ensure their insurance remains intact during their leave.
Additional strategies include making voluntary contributions to super before or during leave, considering spouse contributions, or even splitting super contributions after the financial year. Employees can split up to 85 per cent of their concessional contributions while accounting for taxes.
For those with multiple super accounts, consolidation could reduce fees and administrative burdens, achievable through the myGov platform. Moreover, investors are encouraged to reassess their investment strategies and seek tailored financial advice.
Conclusion
With these changes to superannuation contributions during parental leave, new parents in Australia can expect to see a notable increase in their long-term savings and financial security. This regulatory shift presents an excellent opportunity for families to bolster their retirement funding while navigating the challenges of new parenthood.
