Need to know
- Many were expecting an announcement in the federal budget on super for government-sponsored paid parental leave, but none came on the night
- The Retirement Income Review confirmed that making super payable on this leave would help bridge the gender divide in retirement savings
Super Consumers Australia director Xavier O'Halloran is calling on all political parties to put forward their policies around super on paid parental leave ahead of the next federal election.
"We didn't see it in the budget, but with a federal election on the horizon, I'd expect to see an announcement on super on paid parental leave," he says.
"This would've been a small but significant step towards gender equity in our retirement system."
No mandatory super on paid parental leave
In Australia, there are two types of paid parental leave. Employers have to pay parental leave to workers who:
- live in Australia
- have worked in Australia for at least a year before the expected birth or adoption date
- are taking at least eight weeks off
- will continue working there until the end of the paid parental leave period.
Employers don't have to pay super on paid parental leave, but some workplaces have chosen to pay it anyway.
Australians who've completed at least a year of continuous service in their job may also take unpaid parental leave.
Governmental Parental Leave Pay
Those on parental leave (both paid and unpaid) are also entitled to receive Governmental Parental Leave Pay for 18 weeks. This is in two instalments: an initial set period of 12 weeks and then a flexible period of six weeks.
You can get both Employer-paid Parental Leave Pay and Governmental Parental Leave Pay.
The government scheme is means-tested, so people earning less than $150,000 are paid the minimum wage to support them while they raise their newborn or adopted child. There is no super paid on this type of paid parental leave.
Nearly all recipients women
While the parental leave policy is gender-neutral, it's overwhelmingly taken by women. A review of this leave by the Department of Social Services in 2013-14 found that 99.4% of recipients are women.
It follows, then, that paying super on this leave would improve gender equity in retirement savings.
Super Consumers Australia supports the change
Xavier O'Halloran says that because the improvements are modest, these findings shouldn't be misread as a reason not to make the change.
"The government is taking on board other changes to make Australia's retirement system fairer, like abolishing the $450/month threshold," he says.
"When you look at these apparently small improvements to the super system together, they can add up to more Australians having adequate savings to retire safely."
No one policy lever, in this case paying super on paid parental leave, will solve the gender super gapSandra Buckley, CEO, Women in Super
Women in Super CEO Sandra Buckley agrees with this approach.
"No one policy lever, in this case paying super on paid parental leave, will solve the gender super gap," says Buckley.
"However, discounting paying super on (paid parental leave) just because its net effect on retirement incomes is small is very short-sighted."
Improving gender equity in retirement
A range of interested parties, including the Australian Nursing & Midwifery Federation (ANMF), had also recommended super be paid on the different types of parental leave to improve retirement outcomes for women.
"Given our… workforce is 89% female, (paying super) on paid parental leave is a critical issue for our members," says ANMF Assistant Federal-Secretary Lori-Anne Sharp.
Women should not be penalised for taking time out of their work to care for their family or communityLori-Anne Sharp, ANMF Assistant Federal-Secretary
"Women who retire on average with 47% less superannuation savings than men should not be penalised for taking time out of their work to care for their family or community."
Advocates also raised the point that paying super on parental leave would be fair, given that super is already paid on other types of leave such as annual leave and sick leave.
There was widespread support for the government paying super on its paid parental scheme.
What do businesses and researchers say?
There is widespread support for the government paying super on its paid parental scheme. There is even a strong, broader economic case for doing it.
A 2021 report from consulting firm KPMG recommended the government pay super on Commonwealth-funded paid parental leave. It also advocated:
- allowing employers to make unused super concessional contributions for staff on Commonwealth paid parental leave with no time limit
- amending sex-discrimination laws so employers can choose to make higher super payments to women
- reworking the Commonwealth paid parental leave scheme to encourage men and women to share these leave entitlements more equally.
The report found this suite of measures would help improve gender equity for Australian parents.
Previous research from KPMG found that improving gender equity around work isn't just fair, but also makes economic sense. For example, halving the gap in workplace participation rates between men and women would add some $60 billion to Australia's GDP over the next 20 years.
Business Council of Australia has supported KPMG's findings. The group, which is made up of CEOs from many of Australia's biggest companies, has stressed the economic value that would flow from more flexible paid parental leave and greater gender equity in workplace participation.
Payable straight to the ATO?
Peter Strong, CEO of the Council of Small Business Organisations Australia, says that his organisation doesn't oppose super on paid parental leave in principle. But he wants these super payments to be payable straight to the Australian Taxation Office (ATO).
"Put it in tax and that solves the problem," says Strong. "All these conversations disappear once it's in the tax system."
There is still more that can be done to close the gender retirement gap, including investigating making super compulsory on employer-paid parental leaveXavier O'Halloran, director, Super Consumers Australia
It is also worth noting that the majority of businesses who provide paid parental leave have already voluntarily been paying super on this leave.
"These kinds of small changes can cumulatively add up to a much fairer retirement system," says O'Halloran of Super Consumers Australia.
"There is still more that can be done to close the gender retirement gap, including investigating making super compulsory on employer-paid parental leave."
This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.
Stock images: Getty, unless otherwise stated.