Superannuation Payments on Paid Parental Leave: Changes and Implications
From July 1 this year, Australian families will benefit from a significant policy change: superannuation contributions will now be made on government-paid parental leave. This initiative, which passed through parliament last year, is expected to support around 180,000 families annually. According to the Super Members Council, this policy could enhance a mother’s retirement savings by approximately $14,500, providing crucial financial backing during and after parental leave.
However, the Coalition has indicated plans to revamp this scheme should they succeed in the upcoming election, proposing to make superannuation contributions on parental leave optional. Their alternative proposal suggests families could opt for extended leave or receive a one-off payment of $2,900 in lieu of superannuation contributions.
The CEO of the Super Members Council, Misha Schubert, has voiced strong opposition to this potential change, arguing that it undermines the core purpose of increasing retirement savings for mothers and closing the gender super gap. She stressed the troubling notion that new mothers might be compelled to choose between immediate financial support and long-term retirement security.
Critics, including the Australian Council of Trade Unions (ACTU), label the proposed changes as detrimental to working women. They estimate that cutting super on paid parental leave could result in a loss of $158 million in superannuation contributions over the next four years for women and their families. ACTU President Michele O’Neil remarked that reducing super contributions contradicts the aim of boosting workforce participation among women.
Research by Women In Super reveals that the financial repercussions of these changes could equate to a staggering $7,500 reduction in a woman’s retirement savings due to the impacts of compound interest over time, highlighting the long-term consequences of relying on temporary cash-outs.
Statistical data further illustrates the inequality in superannuation savings between genders, with average retirement savings for women approximately $50,000 less than their male counterparts. The lack of consistent workforce participation is a key factor contributing to this disparity.
As of July 1, parents taking government-paid parental leave will see superannuation contributions applied to their payments at a rate of 12%, aligned with the increase in the superannuation guarantee from 11.5% to 12%. Additionally, parental leave duration will extend from 22 to 24 weeks, with further increments planned until it reaches a total of 26 weeks by July 2026. The paid leave, set at the national minimum wage, currently amounts to $915.80 per standard five-day week.
The forthcoming changes reflect the government’s commitment to enhancing financial security for families during the critical period of parental leave. The legislation ensuring these super contributions is already enacted and will remain effective irrespective of political outcomes in the forthcoming election.
Summary
With superannuation now applicable to government-paid parental leave, the policy aims to support families by boosting retirement savings for mothers. However, proposed changes by the Coalition to make these contributions optional bring significant concerns about the long-term impact on women’s financial security, especially given the existing gender super gap. Advocates are urging the protection of these benefits, emphasising the essential role of superannuation in ensuring financial stability for working Australians.
