Superannuation and paid parental leave in Australia

In Australia, parents of a newborn or adopted child may be entitled to government or employer-funded paid parental leave options. Parental leave is a way to continue to receive an income while you are caring for a child and not working.

While not all employers offer super on paid parental leave, the Australian government has recently announced they will pay superannuation on government-funded paid parental leave.

Parental Leave Pay from the government

The Australian government's Paid Parental Leave Scheme provides the primary caregiver of a newborn or adopted child a weekly wage to cover time away from work.

There are certain requirements you will need to meet to be eligible for the payment, including:

• The Income test
• The work test

See the full list of requirements

Changes to Government funded paid parental leave

From 1 July 2025 the Federal Government will pay superannuation as part of its Paid Parental Leave Scheme.

This means eligible parents with babies born or adopted from July next year will receive an extra 12% of their government-funded parental leave as payment to their super fund.

These changes fall under a national strategy proposed by the Albanese government to prioritise gender equality and help improve women's workforce participation.

Parental Leave Pay from your employer

Employers don't need to pay super while an employee is on parental leave, whether it's paid or unpaid. There are some companies that will pay superannuation contributions on top of your paid leave, but it is up to the company. Each employer will have their policy which may or may not offer paid parental leave. Employers are not obligated to provide parental leave or pay super on paid parental leave and each employer will have their own policy.

In some instances, you may be eligible for paid leave from the government and your employer.

How are women impacted by not being paid super on parental leave?

Primary carer's leave is becoming increasingly available to both men and women, but only 12% of those who took it last year were men.¹ Despite efforts to normalise parental leave for men, women are more likely to take on primary caring responsibilities and have fragmented work patterns of paid work. For example, taking 5 years off work from age 29 – 34 is estimated to shave $100,000 off women's average retirement savings.²

In addition to helping improve the financial security of women retiring, the Albanese government's agenda reinforces that paid parental leave is not a welfare payment but a workplace entitlement like annual and sick leave.³

How can you boost your retirement savings if you're not receiving super on parental leave?

Salary sacrificing

You can choose to ‘sacrifice' part of your salary and direct it to your super savings instead (sometimes referred to as before-tax contributions). For most people, salary sacrificing is an easy, automatic set-up that could result in a tax deduction, too.

On top of boosting your superannuation, your salary sacrificed amount will only be taxed at 15% (often less than your income tax rate). You'll also reduce your taxable income and potentially your tax payable, making tax return time a little more rewarding each financial year.

Voluntary contributions

Voluntary super contributions are contributions you actively choose to make. They're different to your employer contributions because they're not compulsory. People make voluntary super contributions to give their super balance a boost, knowing they'll have more money to enjoy when they retire.

There are 2 main types of voluntary superannuation contributions: after-tax (or non-concessional) and before-tax (concessional).

After-tax contributions — If you're employed, your take-home pay has usually had PAYG tax deducted from it. If you contribute to super with that money, it will be an after-tax contribution, also known as a non-concessional contribution.

Before-tax contributions — Also known as concessional contributions, these are made with money that hasn't been taxed yet. Your super guarantee (SG) employer contributions fall under this category, but you can also choose to make personal before-tax contributions.

Each type of voluntary contribution comes with its own set of benefits, rules and limits. It's important to understand these before making personal super contributions.

Boost your partner's super

Partnerships are about supporting each other. There may come a time when your partner's superannuation growth will need a boost from you. There are two ways you can help your partner grow their super:

• Spouse contributions (after-tax)
• Contribution splitting (before-tax)

Making a spouse contribution may also make you eligible for a tax offset.

What's NGS Super's stance on parental leave?

We believe paying superannuation on government parental leave is an important investment for employees, particularly women, so they are not later disadvantaged when they retire due to breaks from the workforce. Women have significantly less money saved for their retirement — half of all women aged 45 to 59 have $8,000 or less in their superannuation funds, compared to $31,000 for men.⁴

At NGS Super, our staff who take parental leave have superannuation paid at their full rate for the duration of their leave (paid and unpaid), up to 12 months.

Start your journey with NGS Super

If you feel ready to review your finances, why not connect with one of our NGS Super Specialists?

Whether at the start of your career journey, approaching retirement or anywhere in between, our Super Specialists are here to help. It's free, and they can answer your questions about superannuation, investments, insurance or transition to retirement. They can also help you decide the next steps — including if meeting with an NGS financial planner is right for you.

Our financial planners can create strategies that aim to maximise your financial position and meet your objectives for the future. Financial advice can also involve protecting your lifestyle and assets through personal insurance and looking at what happens to your super when you die and the impact on your loved ones receiving your super.

Seeking advice is a way to plan for your future, to mitigate risks and make the most of your saving opportunities. Education is integral to the planning process — it's important that you feel confident and informed at all times.

¹ https://www.wgea.gov.au/sites/default/files/documents/2020-21_WGEA_SCORECARD.pdf.
² https://www.australianretirementtrust.com.au/superannuation/women-and-super
³ https://ministers.pmc.gov.au/gallagher/2024/paying-super-government-paid-parental-leave-enhance-economic-security-and-gender-equality#:~:text=The%20Albanese%20Labor%20Government%20will,strategy%20to%20achieve%20gender%20equality.
⁴ Simon Kelly, 'Entering Retirement: the Financial Aspects' (Paper presented at the Communicating the Gendered Impact of Economic Policies: The Case of Women's Retirement Incomes, Perth, 12-13 December 2006).