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After years of lobbying and broken promises, Labor has announced plans to pay super on paid parental leave entitlements by mid-2025.
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Labor pledges to pay super on parental leave
08 March 2024
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On Thursday, Labor pledged to pay superannuation on top of paid parental leave entitlements. Under the plan, a super rate of 12 per cent would be paid on top of the national paid parental leave rate of $882.75 per week.
Mary Delahunty, Association of Superannuation Funds CEO said, “it’s about bloody time.”
“It’s something that ASFA and many people in the superannuation industry have been calling for, for a long time,” she said, adding “We would have loved it yesterday or ten years ago, or really any time,” but that the changes are nonetheless welcomed.
Australia was “at risk of falling further behind” among comparable nations by failing to pay super on parental leave, said Delahunty, adding it is the “only commonly taken form of leave” in the country that does not attract superannuation.
The retirement savings gap is a corollary of the ongoing gender pay discussion. According to ASFA, the median female super balance is 25 per cent lower than for males leading up to retirement age.
“It’s an important signal that women’s work matters, that taking time out of the workforce matters, and that you shouldn’t be financially penalised for doing so,” said Delahunty.
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Given the gap widens around age 30, childbirth and rearing are seen as the key reasons behind the savings gap, according to ASFA deputy CEO, Glen McCrea.
Delahunty said Labor’s plan goes some way to address gender imbalances, “but not all the way.” Apart from broader factors such as gender pay gaps and social biases, Labor’s plan says nothing of the private employers who do not pay super on their parental leave payments.
Approximately 80 per cent of employers that offer paid parental leave also pay super on those payments, said Delahunty.
Labor’s plan will apply only to government parental leave payments meaning private employers who offer parental leave without super will be unaffected.
“So that’s a trend that should be increased to 100 per cent, it should be mandatory,” said Delahunty, adding there are “tweaks to be had with this, but [the plan] is very welcome.”
While the costs of implementing the changes are not yet known, Treasury estimated it would have cost approximately $200 million per year had it been introduced in 2018–2019 when 178,000 people accessed their 18-week paid leave entitlements.
From July next year, carers will be entitled to 24 weeks of paid leave, meaning the costs will likely be significantly higher, not to mention more will likely be accessing the leave. ABC News estimated the amount will sit around the half-a-billion-dollar mark.
Delahunty said the costs will more likely rest at around $300 million per year, though this will not be certain until the next budget.
“We’ve got no doubt that this will affect the budget…but the calculation to keep in mind what that budget analysis is that at least it goes into women’s retirement accounts for them to use to afford a dignified lifestyle,” said Delahunty.
“So, the return on investment…is that it nets off something that would have been spent on social security anyway,” she added.
By delaying the rollout until mid-2025, the changes might be contingent upon Labor winning the next federal election.
“We understand that [for] these changes, there is a legislative pathway that will need to be woven for this to be successful, and there are changes to the ATO systems in order to enact it…so there is a natural sort of lag anyway,” said Delahunty.
“Our job now as ASFA, as the voice of super, is to make sure this has bipartisan support so that it is not actually contingent upon an election result.”
The ACTU said the move was a “historic step” in closing the retirement savings gap, adding unions have “long campaigned” for the changes.
Senator Katy Gallagher said the plan “helps normalise taking time off work for caring responsibilities and reinforces paid parental leave is not a welfare payment – it is a workplace entitlement just like annual and sick leave.”
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