Senate legislates to close parental leave super gap

Patrick Buncsi

20 September 2024

In a win for new parents, the Federal Government has confirmed the passage of its bill that will guarantee superannuation will continue to be paid during parental leave.

The passage of the legislation through the Senate effectively extends the Superannuation Guarantee to the Commonwealth-funded Paid Parental Leave scheme.

As it stands, parental leave is one of the only types of paid leave that does not attract super.

Super sector peak body, The Super Members Council (SMC), hailed the introduction of the laws, which it says will go a long way to reduce the gender super gap.

The SMC estimates that women, typically the ones to take parental leave, are left with a shortfall of around $50,000 in their retirement funds, or around one-quarter less super, at retirement compared to men.

Only 14% of men took paid parental leave last year, despite nearly two out of three employers now offering it, according to figures from Deloitte.

According to peak body, around 180,000 Australian families will benefit each year from the new laws – “with the lion’s share of benefits flowing to working mums who would otherwise have missed out on super contributions”.

As a result of the new laws, which commence from 1 July 2025, the SMC estimates that a mother-of-two’s retirement savings will increase by about $14,500.

“This historic reform will make a big difference to the lives and retirement incomes of generations of Australian women – and we thank all Senators who supported the legislation,” said SMC chief executive Misha Schubert.

For SMC, the compulsory super payments on parental leave will serve as “a highly effective gender equity measure”.

“It will powerfully propel Australia closer toward ending the financial ‘motherhood penalty’ in the early years of having children – which has a compounding effect across women’s working lives.”

AustralianSuper, the country’s biggest super fund which said it had campaigned on this issue for many years, welcomed the new mandated super payment as a “major milestone for members, [and] particularly women”.

“Paying super on Paid Parental Leave is going to provide a boost to the retirement savings for those receiving the Commonwealth Parental Leave Pay and it will be particularly significant for low paid and vulnerable workers,’ said AustralianSuper chief member officer Rose Kerlin.

Kerlin noted the considerable super pay gap that results when parents take leave to care for their newborns – a responsibility that typically falls on women.

“We know that a woman who takes 10 years out of the workforce to care for children has 12 per cent less income in retirement than a person who has no career break,” Kerlin said.

While the SMC welcomed the legislation as “a momentous step towards making super more equitable”, it called on the Government to not rest on its laurels and “quickly pass the Objective of Super legislation” introduced nearly a year ago.