What does the push for 26 weeks parental leave mean for superannuation?

There has long been pressure placed on the Australian government to increase the amount of paid parental leave offered to new parents. But the implication on superannuation must also be considered.

Last month, The Royal Australasian College of Physicians (RACP) announced its partnership with the Thrive by Five campaign to help support children aged zero to five years in reaching their full potential, including prioritising parental care in the first year of a child’s life.

RACP President and Paediatrician Dr Jacqueline Small said: “The RACP supports Thrive by Five’s call to the Federal Government to phase in paid parental leave for up to 12 months.”

“The evidence shows that exclusive parental care fosters improved maternal and child health with improved developmental outcomes for the child.”

Currently, eligible primary carers of a newborn or newly adopted child are entitled to up to 18 weeks of government funded Parental Leave Pay, paid at the national minimum wage. However, those receiving the payments do not currently receive the super guarantee during this period of leave.

Prior to the Labor Party’s success in the 2022 federal election, now Prime Minister Anthony Albanese shared Labor’s long-term plan to expand the scheme by paying eligible parents 26 weeks of leave at their normal salary, including superannuation.

However, Prime Minister Albanese later confirmed the plan was not an election promise, and is unlikely to happen in Labor's first term given Australia's debt levels.

Industry Super Australia (ISA) have long been calling on the government to pay super on Parental Leave Pay, in an effort to narrow the widening gender super gap.

According to ISA, an overwhelming majority (99.5%) of women take Commonwealth Parental Leave Pay, compared to just 0.5% of men – which is a major contributor to the gender super gap.

ISA Advocacy Director Georgia Brumby said: “Working mums should not be left behind for having a baby. It’s time to end this tax on pregnancy.” 

If the government were to extend Parental Leave Pay to 26 weeks without committing to pay superannuation for the full period, recipients could be looking at an additional eight weeks of lost super on top of the existing 18 weeks. This, of course, would double, triple, or more if the individual accesses the scheme multiple times for the birth or adoption of additional children.

How can you make up for lost super when taking parental leave?

Until the government legislates the proposal to pay super on Parental Leave Pay, it’s up to those individuals accessing the scheme to ensure their super doesn’t fall behind.

There are a number of ways you could consider doing this, including:

• Making additional payments ahead of time – If you’re planning to have a child in the future and you have some time up your sleeve, you could make additional concessional contributions into your super fund to cover what you may miss out on by taking parental leave. Start by calculating how much you may lose in super while you are away from work and consider how much you could realistically spare from each pay packet to consistently work towards building that amount up.
• Making additional payments after the fact – If you’ve already taken parental leave or plan to soon, you may not have the opportunity to cover lost super pre-emptively. Instead, you could make additional concessional contributions once you return to the workforce.
• Having your spouse make payments into your super fund – If you are married or in a de facto relationship, your spouse could make contributions into your super fund from their income while you are taking on the role as primary carer for your child. According to the Australian Taxation Office, your spouse may be able to claim a tax offset if they make an eligible contribution on your behalf when you are not working.

Making the most of your retirement savings begins with developing good financial habits, such as regularly comparing your super fund’s performance against that of others, to ensure it remains competitive.

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