New parents will now receive important superannuation contributions when they take time off to care for their babies, bringing Paid Parental Leave in line with other workplace entitlements.
The Albanese Labor Government has legislated paying superannuation on Paid Parental Leave with the passage of the Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Bill 2024 in the Senate today.
It means that eligible parents with babies born or adopted on or after 1 July 2025 will receive an additional payment, based on the Superannuation Guarantee (12 per cent of their Paid Parental Leave payment), as a contribution to their nominated superannuation fund.
Once the scheme reaches 26 weeks, the maximum amount a family would receive in superannuation contributions for each birth or adoption will be more than $3000. This would then be subject to compounding interest over the working lifetime of an individual’s superannuation account.
Parents will receive a lump sum superannuation payment – including an interest component – following the end of each financial year where they received Paid Parental Leave. The contribution will be automatically deposited into the superannuation accounts of eligible parents.
The move will boost the superannuation balances of parents and help close the gender gap in retirement savings.
It also implements a recommendation of the Women's Economic Equality Taskforce.
Passage of the historic reform builds upon recent changes made by Labor which have made Paid Parental Leave more flexible, accessible, and gender equitable, and increased the length of the scheme.
From 2026, Australian parents will receive a full six-months of government-funded Paid Parental Leave, often in addition to their own employer-funded schemes.
Minister for Social Services, Amanda Rishworth, said that paying superannuation on Paid Parental Leave will improve the economic security in retirement of around 180,000 Australian families each year.
“We know women retire with 25 per cent less superannuation than men – an estimated $51,700 less on average. By investing in these reforms, we are ensuring families can get the most of Paid Parental Leave, exercise more choice and flexibility and have a more secure retirement,” Minister Rishworth said.
“Investing $1.1 billion over the forward estimates to pay superannuation on Paid Parental Leave is a key step in prioritising gender equality as most recipients are women who will have lower superannuation balances. The measure will directly reduce the impact of parental leave on retirement incomes.
“This reform signals that caring for babies is valued and helps to normalise parental leave as a workplace entitlement.”
Minister for Women Katy Gallagher said the Albanese Government is proud to be paying super on paid parental leave, boosting the retirement incomes of Australian women.
“We know that when women take time out of the workforce to have children, they take a hit to their super balances, retiring with 25 per cent less super than men,” Minister Gallagher said.
“This move not only strengthens Labor’s legacy of compulsory super but ensures greater fairness and financial security for Australian women.
“This is an important statement about the value that we place on parents taking time out of the paid workforce to care for the next generations— because you shouldn’t have to sacrifice your future financial security to care for your babies.”
More information on the Paid Parental Leave scheme can be found on the Department of Social Services website.