From July 1, parents taking government-funded paid parental leave will also receive superannuation payments, a move that will help reduce the gender super gap that leaves women worse off in retirement.
The change to Commonwealth Parental Leave Pay was legislated by the Albanese government in its first term. It will benefit about 200,000 Australian mothers each year and narrow the gender super gap, which is currently about $50,000, by about a quarter.
Until now, parental leave was the only type of paid leave that didn’t include superannuation payments.
According to analysis by the Super Members Council, a woman who has two children and takes one year of maternity leave for each one, then works part-time, would likely reduce her super by $55,500 and lifetime disposable income by $649,400. This reform to add super payments on paid parental leave will see this reduced.
The super gender gap widens substantially when women reach their 30s, when they are more likely to take time out of the paid workforce to have children.
The analysis also shows Western Australia has the widest gender super gap of all states at 33 per cent. NSW has a gap of 18 per cent, Victoria’s gap is 19 per cent, while Queensland’s gap is 23 per cent.
In Australia, women still take the majority of paid parental leave. The Albanese government has also recently expanded the scheme out to 26 weeks by 2026, adding “use it or lose it” provisions to entice fathers to take more leave.
Super Members Council’s CEO Misha Schubert said the superannuation reform on paid parental leave was an “historic achievement”.
“We’re not talking baby steps here – this is a huge stride forward to tackle women’s retirement inequity,” she said.
“This reform will make millions of women thousands of dollars better off in retirement, helping to narrow the gender super gap,” she said. “It’s going to be transformative to help to tackle gender inequity in retirement.”
Paying super on the Commonwealth parental leave scheme will benefit around 200,000 Australian mothers each year. It will narrow the gender super gap by around a quarter, which is currently about $50,000 for Australians nearing retirement.
What’s next?
With super soon to be available on paid parental leave, there is now a push to see a boost to the Low-Income Super Tax Offset (LISTO). This change could see the lowest income workers, mostly women, become better off in retirement.
The LISTO is a super tax refund for low-income workers. It has been frozen for 13 years and has not increased in line with tax brackets, or changes to the Super Guarantee rate.
Over the next two years, when low-income tax breaks come into effect, low-income workers will be paying more tax on super than on their take-home pay. The Super Members Council said it is an issue that must be fixed urgently.
“There is more work to do to reverse the financial ‘motherhood penalty’ women experience in the early years of having children, which adds up over their working lives,” Schubert said.
“Lifting the Low-Income Super Tax Offset is the next logical step for the Government to tackle women’s retirement poverty and help more than 700,000 low-income women to have more financial independence and security when they retire.”
A female worker bottom 20 per cent of wage earners could be up to $30,000 or 12 per cent better off in retirement if the LISTO is lifted to $810 a year for workers earning up to $45,000.
Combined with super on parental leave, women in the lowest 10 per cent of earners would see a 21 per cent boost in their super balance at retirement.