By Catherine Ngo Senior Editor and Content Writer, My Business
New parents' superannuation will be topped up by the federal government when they take time off to care for their newborn. The laws, which pay superannuation on top of government-funded paid parental leave, have been introduced to federal parliament with the goal of lowering the gender gap in retirement savings.
The introduction of the Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Bill 2024 in the House of Representatives builds upon recent reforms, including expanding the scheme to 26 weeks by 2026. Since July 1, 2024, parents can receive 22 weeks of Paid Parental Leave which is an increase from 20 weeks.
Upon passing the legislation, parents who meet the eligibility criteria and have babies born or adopted on or after July 1, 2025, will receive an extra payment. This payment will be based on the Superannuation Guarantee (12% of their Paid Parental Leave payment) and will be contributed to their nominated super fund.
The Australian government's Paid Parental Leave scheme aims to enhance the economic security of around 180,000 families annually by ensuring that superannuation contributions are made during this period.
This initiative provides eligible working parents with financial support, allowing them to take time off work following the birth or adoption of a child.
Reducing the financial stress for families
The expansion of the scheme to six months from 2026 is projected to provide new parents with approximately $3,000 in additional superannuation contributions throughout their leave.
Amanda Rishworth, the Minister for Social Services, says the proposed laws would enhance gender equality while simultaneously strengthening the economic stability of women.
"Women make up the majority of primary caregivers in this country, leading to what has been referred to as the motherhood penalty, where they face greater economic insecurity because of time out of the workforce to care for children," she told parliament.
"Paying super on paid parental leave is a positive investment in the future of working women and in our broader economy."
Some employers are already paying superannuation on top of paid parental leave schemes, the new legislation would ensure parents using government-funded parental leave would be able to access the same benefit.
Addition of super on parental leave a no-brainer
Georgie Dent, CEO of The Parenthood, a family advocacy group, anticipates that the proposed changes could result in families retiring with an additional $30,000 in retirement savings per child.
Additionally, she says the excessive cost of early childhood education and care and lost income while out of the workforce pose significant financial challenges for Australian families considering having children.
Including superannuation payments in these changes would emphasise that paid parental leave is not a government welfare program but rather a workplace entitlement comparable to annual or sick leave.
Women in Super has consistently highlighted the inequity and discriminatory nature of paying super on sick leave, annual leave, and long service leave while excluding paid parental leave, which women primarily use. This disparity perpetuates gender inequality in the superannuation system.