How much could parents benefit from super on parental leave?
The government has announced plans to pay superannuation to those on paid parental leave.
Minister for Finance and Women Katy Gallagher said it would help to close the gender gap in retirement incomes.
The change is not immediate – it must first be approved by parliament and wouldn’t take effect until July 2025, after the next election.
But here’s how it would work, and how it would affect parents.
What is paid parental leave?
These changes apply to the government-funded paid parental leave scheme.
That’s a scheme which is available to parents who earn below a certain amount, as an alternative or a supplement to employer-funded leave.
It is paid at minimum wage, which is currently $882.75 a week.
Currently, parents get 20 weeks a child. This will rise to 22 weeks in July, 24 weeks next year, and 26 weeks the year after that.
In two-parent families, parents can share the leave between them. Currently, two weeks are reserved for the “non-primary” carer, to encourage at least some sharing. By 2026, this will change so that four weeks are reserved for each parent, to encourage more equal sharing.
Eligibility for the government scheme is limited by taxable income – measured in the year before you have the child.
This year, the income threshold is $168,865, or $350,000 for a two-parent family.
What is the change?
From July 2025, parents accessing the government scheme would also get super paid into their nominated super account, equivalent to 12 per cent of their leave pay.
Under the current rate, that’s about $106 a week of leave.
How many people will benefit?
About 180,000 families use the government scheme each year, so would stand to benefit.
Eighty eight per cent of parental leave is taken by women, so women would be the main beneficiaries.
The changes do not affect employer-run paid leave schemes.
Three in five employers offer such schemes, although only one in five offer them to all employees.
Employer schemes are usually tied to an employee’s pay. Most already pay super, but the government’s proposal will not require that they do.
Speaking at the National Press Club, Senator Gallagher said she “hoped” all employers would consider paying super but added it would be “difficult for government to say we think you should do this if we’re not doing it ourselves”.
How much will they benefit?
It is difficult to be precise about this because the benefits of super are a long way in the future and depend on individual circumstances.
But to give an example, a single parent who takes two 24-week stints for two children would get just over $5,000 extra put into their super.
If the parent was in her or his mid-30s when taking leave, the compounding interest earned by this extra super could result in over $20,000 extra by retirement.
But a complicating factor is that the higher someone’s super balance, the less they may receive from the Age Pension, which is means tested. This would erode some of the benefit.
Pensioners have their payments reduced by $75 a fortnight for every $20,000 of assets they have above a certain threshold. Super is included in this calculation.
This effect is largest for those in the middle, who are in the reduction zone.
Grattan Institute analysis in 2021, when parental leave was 18 weeks, found that super on paid parental leave would provide a benefit of between $73 and $356 a year in retirement, depending on their financial circumstances.
The government has not published figures about how much it believes people would benefit.
Senator Gallagher told the National Press Club “it depends but it would be thousands of dollars [in super] for an average income”.
“It is difficult because it depends on the job you have, how much you work, what you get paid [and] how many children you have.”
