Superannuation on paid parental leave from 1 July 2025
In March 2024, the government announced its intention to commence paying superannuation on government Paid Parental Leave (PPL) payments from 1 July 2025.
Announced as part of the launch of Working for Women: A Strategy for Gender Equality and included in the 2024-25 Budget, the payment of superannuation on PPL aims to reduce the impact that career breaks to care for young children have on superan nuation balances, and to improve equity in the superannuation system. The legislation has now been passed.
New parents eligible for the PPL Scheme with babies born or adopted on or after 1 July 2025 will receive the Paid Parental Leave Superannuation Contribution (PPLSC). The PPLSC has two components: Core component: this is calculated by multiplying the total amount of the PPL paid for the person in an income year by the superannuation guarantee rate for that income year (from 1 July 2025 the superannuation guarantee is 12%);
Interest component: an additional interest component will be added to address foregone returns resulting from the PPLSC being an annual payment.
The PPLSC (both the core component and the interest component) will be paid to parents as a lump sum superannuation payment following the end of each financial year in which they received PPL. Recipients of PPL won't be required to make a claim to access the PPLSC. Instead, the ATO will calculate the PPLSC based on information received from Services Australia about the recipient's payments, and the contribution will be automatically deposited into the nominated superannuation fund of eligible parents.
The PPL scheme has been legislated to expand over time from 20 weeks to 26 weeks. From 1 July 2024, eligible individuals and families receive 2 additional weeks of leave, amounting to 22 weeks in total. This increases to 24 weeks from 1 July 2025, and to 26 weeks from 1 July 2026. This amounts to a total of 6 additional weeks of PPL for new parents. By 2026, a total of 4 weeks will be reserved for each parent on a “use it or lose it” basis, to encourage the sharing of care responsibilities. In addition, the number of PPL weeks a family can utilise at the same time increases to 4 weeks from 1 July 2025, up from the current 2 weeks.
These changes to the PPL scheme will factor into payment of the PPLSC. Once the PPL available reaches 26 weeks in July 2026, the maximum amount a family would receive in superannuation contributions for each birth or adoption would be more than $3,000. Eligibility rules for the PPL scheme can be found on the Services Australia website.