Government to pay super on paid parental leave
If it wins the next election, the Albanese government has announced the Commonwealth Paid Parental Leave (PPL) scheme will include Superannuation Guarantee contributions from next year.
In a major win for Australian women, 12% superannuation contributions will be made by the government alongside parental leave payments, effective July 1, 2025. That is, if Labor is successful at the next federal election, expected to take place in May next year.
The measure is expected to benefit 180,000 families annually. While available to all new parents, the payment of super on PPL will overwhelmingly benefit women, who currently account for about 95% of those accessing the scheme.
It equates to about $106 a week, based on the present rate of PPL of $882.75.
While the impact may be small, it will go some way towards closing the gender super gap. Currently, women retire with as much as 25% less in super. The median balance for those aged 60 to 64 is $211,996 for males and $158,806 for females, according to November 2023 data from the Association of Superannuation Funds of Australia.
The initiative is part of the government's new national strategy for gender equality, Working for Women, and will be factored into the May federal budget. It's expected to cost about $250 million a year, based on previous estimates by Treasury when the SG rate was still 9.5%.
Paying super on top of PPL has long been advocated for by the superannuation industry and unions and was a key recommendation from the Women's Economic Equality Taskforce. When the government announced the proposed $3 million superannuation tax last year, it was hoped the additional revenues derived would be directed to paying super on PPL. At the time, the government said it would do so when it could afford to.
This enhancement follows the government's announcement in October 2022 that it would incrementally increase the scheme from 18 weeks to 26 weeks by 2026. As of July 2023, it offers a combined 20 weeks to new parents, allowing them to take leave concurrently and removing any assumptions around primary care.
"The data is clear - that when women take time out of the workforce to raise children it impacts their retirement incomes with women retiring, on average, with about 25% less super than men," minister for women and finance Katy Gallagher says.
"Paying super on government parental leave is an important investment to help close the super gap and to make decisions about balancing care and work easier for women."
Similarly, minister for families and social services Amanda Rishworth says: "Paying superannuation on PPL is another key step to prioritise gender equality, better value care work and improve women's workforce participation."
"It helps normalise taking time off work for caring responsibilities and reinforces PPL is not a welfare payment - it is a workplace entitlement just like annual and sick leave."
Another recommendation the Women's Economic Equality Taskforce suggested is to extend the PPL scheme by phasing the entitlement up to 52 weeks and boosting the quantum of payments to reach a replacement wage and ensure the scheme incentivises men's use of PPL.
This article first appeared on Financial Standard
Get stories like this in our newsletters.
