Starting from July 1, 2025, parents taking Commonwealth Paid Parental Leave will begin receiving Superannuation Guarantee (SG) contributions on their government payments.
These contributions will be deposited into their nominated super funds the following year and taxed at the current rate of 15%. The estimated payment for 24 weeks of paid parental leave in 2025 will be $2,900, increasing to $3,140 in 2026 as the scheme expands to 26 weeks.
The opposition’s attempts to amend the bill were unsuccessful. They proposed allowing parents to choose between a one-off cash payment equivalent to their super entitlement or an extra two weeks of leave. However, critics, including the Super Members Council, argued that this would undermine the primary goal of the legislation: to increase super balances for new mothers and address the gender super gap.
Modeling by AustralianSuper reveals a stark contrast in retirement savings: a 30-year-old man earning an average wage of $1,983 per week is projected to retire with around $882,000 in superannuation, while a woman earning $1,745 per week will likely retire with approximately $737,000—a gap of $145,000.
Sabrina Scherm, Customer Success Manager at HiBob said: “Women traditionally take more time off to care for children, often at the cost of their superannuation, which is why they retire with 25% less super than men. Introducing 12% super contributions during parental leave is a crucial step in closing that gap, promoting financial security for parents without sacrificing their future — a game-changer for Australian families.
But, it’s important to acknowledge childcare is a business issue, and modern companies need to support flexible work arrangements that reduce travel and childcare costs. By offering hybrid work models and clear performance benchmarks, businesses can create an environment where parents — particularly women who are disproportionately affected — can manage school drop-offs and pick-ups while thriving both personally and professionally. Businesses should also prioritise implementing inclusive parental leave policies that encourage shared caregiving responsibilities and processes that ensure parents feel confident taking leave and transitioning back to work. This will help to level the playing field by ensuring no parent is unfairly disadvantaged and support greater female participation in the workforce.
Implications for businesses
Although the government’s move is a strong step forward, businesses need to take the reins in closing the gender pay gap by voluntarily contributing superannuation payments in addition to the government. HiBob’s research shows only 36% of women believe organisations are doing enough to close the gap, highlighting the need for pay audits, leadership accountability, and initiatives that rebuild trust. By taking these steps, businesses can show real commitment to gender equality and create a more inclusive workplace.”
Increased Payroll Costs
One of the most immediate impacts of the new legislation is the increased financial burden on businesses. With the superannuation guarantee (SG) rate set to rise to 12% by July 2025, companies must account for additional contributions during parental leave periods. This is especially challenging for small to medium-sized enterprises (SMEs) with limited financial resources.
Administrative Changes
Implementing the new legislation also necessitates administrative changes for businesses. Payroll systems must be updated to accurately track super contributions, and HR departments may require additional training to ensure compliance. Furthermore, the increased scrutiny from government agencies and auditors can add to the administrative workload.
Employee Benefits and Retention
On the positive side, mandating super contributions during parental leave can enhance employee benefits and improve retention rates. Offering such support can make businesses more attractive to potential employees and foster loyalty among existing staff.
Hiring Practices
In today’s competitive job market, companies may need to emphasize parental leave policies and super contributions to attract top talent. This could involve revising recruitment strategies and highlighting these benefits in job postings.
Increased Gender Equity
The new legislation is a significant step towards closing the gender superannuation gap, which has long disadvantaged women. By mandating contributions during parental leave, the government is promoting a more equitable workforce and fostering a positive corporate image.
Long-Term Financial Implications
The long-term implications of the new legislation extend beyond immediate costs. By increasing superannuation accumulation, employees are better prepared for retirement, which benefits the overall economy. Additionally, supported employees are more likely to return to work with increased engagement and productivity.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
