The Government has announced plans to add super to paid parental leave (PPL) from 1 July 2025.
Under the proposal, eligible parents will be paid 12% super on top of their total PPL.
It’s estimated women in Australia retire with about 25% less money saved than men. The PPL initiative is aimed at closing the superannuation gender pay gap.
Paid parental leave (PPL)
About 180,000 families receive PPL every year, almost all of the recipients whom are women.
PPL is capped at 20 weeks of federally-funded minimum wage support. Legislation currently before Senate would increase the entitlement to 26 weeks by 2026.
Parents need to have worked consistent hours and complete an income test to prove their eligibility for the payment.
The planned increase to PPL is separate from this week’s announcement, which would add superannuation payments to PPL.
Superannuation
Superannuation, or “super”, is money set aside for retirement from your pay. In most instances, you can’t access until you turn 60.
Every employer in Australia is legally required to make super contributions on behalf of their staff.
The Government hatched super as a way of ensuring retired Australians can financially support themselves, to avoid extra strain on the welfare system (which manages income support payments like the aged pension).
Super & PPL
This week, the government announced plans to add a 12% super contribution to parental leave payments.
Parents currently receiving PPL are paid just over $880 a week.
The government’s proposal would see an additional $106 a week paid into PPL recipients’ superannuation funds.
The government has flagged it will introduce PPL super legislation at a later date. It will release the full cost of the policy in the upcoming federal budget.
Timing
The government wants to introduce the super reforms from 1 July, 2025.
However, a federal election is due before then. If Labor loses government, the super plan could be at risk.
When asked if the government would implement the reforms sooner, Social Services Minister Amanda Rishworth said it needed time to pass legislation and prepare government departments for the rollout.
Gender equality
In an address to the National Press Club on Thursday, Minister for Women Katy Gallagher said: “Making sure we’re more equally sharing and valuing care is just one of the keys to unlocking gender equality in this country”.
In addition, she said the government wants to make sure that if Australians have children, it “won’t impact on your future earnings.”
Support
The Greens and Coalition have both indicated support for adding super payments to PPL.
Moreover, the Coalition said it will work with the government on the proposal, and that it backs the idea in “principle”.
Legislation to increase PPL to 26 weeks is still before the Senate. The Greens urged the government to amend that bill to include the super changes so that payments come into effect sooner.
The advocacy group ‘Women in Super’ has welcomed the government’s plan, which it called a “monumental step towards rectifying the gender super gap”.
Analysis from the group suggests women end up with $53,000 less than men once they retire.
“While no single policy will close the gender super gap, super on paid parental leave is a critical element to ensure we do not condemn future generations to a retirement in poverty,” CEO Jo Kowalczyk.
