Don’t underestimate the importance of super on paid parental leave
Much of the industry response to the Federal Budget has been centered on what it didn’t deliver. But amidst the chatter, let’s not overlook the critical move towards supporting gender equity within superannuation.
In March, the government announced that it will continue its reform of Paid Parental Leave (PPL) by paying superannuation on the government PPL payment. This isn’t a casual decision, it’s a significant step the Government wouldn’t have taken lightly.
Commencing July 2025, eligible parents with children born or adopted on or after 1 July will receive a superannuation guarantee equivalent to 12% of parental leave payments. These contributions will be taxed at the superannuation tax rate of 15% and count towards the individual’s concessional contributions cap. This move, allocating $1.1 billion over four years, demonstrates a tangible commitment by the government in addressing the gender super gap.
This reform is the latest in a series of changes over the past few years by both Labor and Coalition governments that improve superannuation for women, and low-middle-income workers. Previous changes included removing the $450 per month threshold for super (thanks to senator Hume) and eliminating duplicated accounts and insurance. However, unlike these, the changes to paid parental leave come at a real and substantial financial cost to the Government.
The Super Members Council estimates that a mother of two will have $14,500 more in retirement thanks to this benefit. This helps mitigate the retirement income impact of taking parental leave, especially for women, and normalises parental leave as a workplace entitlement alongside annual and sick leave.
It is essential that super funds develop communication platforms to educate members, particularly mothers, about the new entitlement and its long-term benefits. This may involve interactive online tools and targeted messaging through member portals.
As a result of superannuation being based on your income level and the duration of your working life, it has an inherent bias towards advantaging people who are better off. This must be tempered by tax and policy settings to provide more equity and super on PPL is one of these, therefore we should pause and acknowledge this.
Otherwise, not much to see here…
Federal Budgets generally include a slew of announcements about superannuation. Mostly these result in improvements to the system and better outcomes for most Australians who have superannuation – but they also involve implementation challenges and costs.
This year’s budget was the exception. Beyond super on paid parental leave, there wasn’t much about super at all.
But as it turns out, this is a mixed blessing as the industry is also awaiting greater clarity about the way forward for payday super, financial advice reforms, and the retirement phase.
Waiting on payday super
The 2023 Budget highlighted the need to pay superannuation guarantee contributions at the same time as wages and salaries starting July 2026, but the steps to implementation remain unclear. This uncertainty affects super funds and employers, who need time to develop the necessary technological infrastructure and adjust payroll systems to cater to more frequent super contributions.
Reducing the incidence of unpaid super, increasing retirement incomes, and putting super on a level basis with other employer expenditure, means this initiative is worth it, and it’s great the government continues to be committed to it.
Planning better financial advice solutions
The other big initiative where we’re waiting for legislation to materialise is making financial advice simpler, more affordable, and more accessible. From allowing contact centres to provide more meaningful engagements with members, to new robo-advice platforms, and introducing different levels of financial advisors, there are lots of plans to turn legislative plans into a practical reality. This isn’t strictly a budget measure, but it’s eagerly awaited, nonetheless.
At IQ Group we understand the importance of preparedness and compliance to regulatory change and its impact. With our team’s deep domain experience and knowledge of regulations, systems, data, and process re-engineering, we assist clients to effectively plan for, adapt, and implement regulatory change.
Feel free to contact one of our friendly team members if you have any questions, or would like to learn more on how IQ can help you navigate regulatory change.
By David Haynes, Head of Industry Insights
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