Yahoo Finance Cost of living: Major $14,500 cash boost for Aussie parents under super reform
Australians getting the Paid Parental Leave payment will have superannuation paid while they're on leave.
New Aussie mums and dads have scored a major win after the government passed legislation that will provide superannuation on top of paid parental leave (PPL) when they have a child. The bill passed through the House of Representatives last week and it passed through the Senate on Thursday.
It will ensure that the maximum amount that a family could receive in super contributions during PPL for each birth or adoption will soon be more than $3,000 and boost a parent-of-two’s retirement savings by about $14,500. It's estimated to affect 180,000 families each year.
"This will help narrow the gender gap in retirement savings," Prime Minister Anthony Albanese said.
"The first months of your child's life are so special, exhausting at times, but uplifting every day ... you can't put a price on spending that precious time with your new bub, and you shouldn't pay a price for it either."
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How will the paid parental leave superannuation scheme work?
The changes will apply to eligible parents with babies born or adopted from July 2025.
While government-paid parental leave is currently at 22 weeks, the newly passed legislation will mean it can be expanded to six months from 2026.
The maximum amount parents will receive in superannuation will be $113 per week from 2025/26, and it's calculated at 12 per cent of their Paid Parental Leave payment.
Once the scheme reaches 26 weeks, the maximum amount a family would receive in super contributions for each birth or adoption will be more than $3,000.
The extra money will be made as a lump sum payment through the Australian Taxation Office into a nominated superannuation account at the end of the financial year.
This would then be subject to compounding interest over the working lifetime of a person's super account.
“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," minister for Social Services, Amanda Rishworth, said.
"The measure will directly reduce the impact of parental leave on retirement incomes."
Why the initiative could help close the gender pay gap
Super Members Council found earlier this year that Australian women have about $50,000 less superannuation than men when they are nearing retirement.
This gender super gap “dramatically widens” when women reach their 30s because many take time out of the workforce to raise kids.
It then reaches a peak of $57,600, or 31 per cent, during the ages of 55 to 59.
“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,” Finance minister Katy Gallagher said.
“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.”
Super Members Council CEO Misha Schubert believes this legislation will ensure women "can have a financially secure retirement".
“It will powerfully propel Australia closer towards the goal of ending the financial ‘motherhood penalty’ in the early years of having children – which has a compounding effect across women’s working lives,” she said.
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