Starting in July 2025, Australia will introduce superannuation payments on government-funded Paid Parental Leave (PPL). This change, aimed at addressing the retirement savings gap, particularly for women, will bring 12% super contributions to PPL payments, impacting around 180,000 families annually.
Here’s everything you need to know about eligibility, how it works, and its significance for gender equality and family financial security.
| Aspect | Details |
|---|---|
| Start Date | July 1, 2025 |
| Superannuation Rate | 12% of Paid Parental Leave payment |
| Eligible Period | Up to 26 weeks (starts at 22 weeks) |
| Beneficiaries | Around 180,000 families per year |
| Purpose | Improve retirement savings, close gender gap |
| Estimated Budget | AUD 1.1 billion over forward estimates |
What’s Changing in Paid Parental Leave?
Currently, Australia’s PPL scheme provides eligible parents with paid leave at the national minimum wage but without any superannuation contributions.
As women often bear more caregiving responsibilities, they generally retire with less superannuation savings than men. This gender retirement gap is significant, with Australian women retiring with about 25% less super than men—an average shortfall of approximately $51,700.
From July 2025, PPL recipients will receive super contributions at 12% of their payments, aligning with Australia’s general superannuation guarantee. Initially, super will apply to a 22-week leave period, which will increase to 26 weeks by 2026 as the government expands PPL.
Why Superannuation on PPL Matters
The inclusion of superannuation on PPL is a key policy for addressing the gender retirement gap. Many parents, particularly women, lose out on super contributions while on leave, further widening the gender disparity in retirement savings.
By adding super contributions to PPL, the Australian government aims to build financial security for parents who take time off to care for their children.
This reform aligns with broader efforts to improve economic conditions for women, including plans to extend PPL to 26 weeks by 2026 and make childcare more affordable. The AUD 1.1 billion investment underscores the government’s commitment to enhancing financial security and promoting gender equality.
How Will Superannuation on PPL Work?
Here’s how superannuation contributions on PPL will be implemented:
- Super Contributions Rate: Parents will receive 12% of their PPL payments as super contributions, calculated from the national minimum wage, which forms the basis for PPL payments.
- Payment Period: The super contributions apply to the entire PPL period, starting with 22 weeks in 2025, then extending to 24 weeks, and eventually 26 weeks by 2026.
- Lump Sum Payments: Super contributions will be made as a lump sum after each financial year, including an interest component to reflect super growth during leave.
- No Impact on Employer Contributions: These super contributions are in addition to any contributions received from employers, maintaining consistency in retirement savings.
Practical Impact on Retirement Savings
For a parent receiving PPL for the maximum period of 26 weeks, the superannuation contribution could amount to around $3,000, depending on the national minimum wage.
Over a lifetime, this additional contribution can have a compounding effect on retirement savings, helping close the gender gap in superannuation.
Benefits for Families and Gender Equality
This change normalizes parental leave for both genders, encouraging a shared approach to child-rearing without sacrificing long-term financial security. It helps reduce the financial penalty often associated with taking time off for family responsibilities, especially for women.
Supporting an Equitable Workforce
With super contributions on PPL, all parents, regardless of gender, can take parental leave without significantly compromising their retirement savings. This policy reinforces a more equitable workforce, allowing both parents to engage in caregiving without long-term financial disadvantages.
Challenges and Calls for Further Reforms
While widely welcomed, the superannuation reform has prompted calls for additional changes. Greens Senator Larissa Waters and other advocates suggest extending the PPL period to 52 weeks, as recommended by the Women’s Economic Equality Taskforce.
This would bring Australia closer to international standards for parental leave and provide more substantial support for working families.
Additionally, the AUD 1.1 billion cost to fund super contributions has sparked budgetary concerns. The opposition has questioned whether the government can sustain this level of investment and whether other financial areas might be impacted as a result.
How to Prepare for Superannuation on PPL
Parents expecting to benefit from the new PPL policy in 2025 can start by:
- Reviewing Super Fund Options: Ensure that your super fund meets your needs and preferences. If you’re expecting to benefit from PPL in the coming years, now is an excellent time to compare fees, returns, and services among super funds.
- Checking Eligibility and Planning Leave: The 12% super contribution applies to the national minimum wage-based PPL. If you plan on applying for PPL, consider how the updated policy could affect your retirement savings and family financial plans.
- Tracking Super Growth During Leave: Since super contributions will be paid as a lump sum at the end of each financial year, understanding how this affects your super balance and compounding returns can help you stay informed of your retirement outlook.
This policy marks a step forward in recognizing the financial implications of family leave on long-term savings and represents a significant shift in Australia’s approach to gender equality in retirement planning.
