Australia announces 12% superannuation on paid parental leave

Beginning in July 2025, parents will receive 12% superannuation, equivalent to approximately $106 per week, as part of the publicly funded paid parental leave initiative introduced by the Albanese government. This decision, estimated to incur a cost of at least $250 million annually to the federal budget, addresses calls from the Women’s Economic Equality Taskforce, unions, and the crossbench to include super contributions in paid parental leave to mitigate the retirement savings gap between men and women.

Minister for Women Katy Gallagher and Social Services Minister Amanda Rishworth unveiled the announcement ahead of Gallagher’s address to the National Press Club, outlining the inaugural gender equality strategy. Under the plan, eligible parents with babies born or adopted after July 1, 2025, will receive an additional 12% on their government-funded parental leave deposited into their super accounts.

Based on the current rate of paid parental leave, which is $882.75 per week, parents would qualify for a minimum of an extra $106 per week contributed to their super accounts. Approximately 180,000 families receive government-funded paid parental leave payments each year.

While the full cost of the measure will be disclosed on budget night, it is anticipated to be at least $250 million per year. In 2020, Treasury estimated a yearly cost of $200 million when the super rate was 9.5%.

Excerpts from the Working for Women gender equality strategy stress the need for more equitable sharing of unpaid and paid care responsibilities, with a focus on valuing and celebrating care. The strategy emphasizes policies that support families in making choices that suit their needs and underscores the importance of addressing caregiving expectations to achieve equality.

The Albanese government had previously extended paid parental leave from 18 to 26 weeks by 2026 but did not commit to paying super, a policy dropped before the 2022 election. The decision to include super on paid parental leave aligns with recommendations from the Women’s Economic Equality Taskforce in October 2023 and responds to the impact of women taking time out of the workforce on their retirement incomes.

Ministers Gallagher and Rishworth underscored the significance of paying superannuation on parental leave as an investment to narrow the super gap and normalize taking time off for caregiving responsibilities. Treasurer Jim Chalmers emphasized the government’s commitment to greater economic inclusion for women, positioning superannuation on paid parental leave as a step towards ensuring women earn more, retain more of their earnings, and retire with more financial security. However, the Treasury in 2020 noted a small impact on narrowing the retirement income gap and highlighted potential reductions in age pension income due to the age pension assets test.

Women in Super has argued against the current disparity, noting that super is paid on sick leave, annual leave, and long service leave but not on paid parental leave, despite the majority of primary carers accessing such leave being women.

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