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Super on paid parental leave

Going on parental leave impacts your superannuation. Here are a few options to help maintain your super balance while you’re taking time out of the workforce.

Superannuation and paid parental leave: Are you covered?

According to an Industry Super report, 68% of Australians believe that super is paid on parental leave. Depending on where you work, you could be eligible to earn superannuation while you're on parental leave. However, this isn't always the case and a lot of Australians are missing out on super while on parental leave.

Superannuation on paid parental leave: Government policies

The Australian government provides 18 weeks of paid parental leave to eligible working parents. This 18 weeks is paid at the national minimum wage and is set to gradually increase to 26 weeks over the next few years.

However, this scheme does not include any superannuation payments while you're on parental leave. There have been ongoing calls for the government to include super guarantee payments on its paid parental leave scheme, but this is not something that has been done so far.

Paid parental leave superannuation: Workplace policies

Depending on your workplace you could be entitled to additional paid parental leave by your employer, which you can use on top of the government's policy. This policy could be anywhere from 2 to 26+ paid weeks of leave.

Whether or not your workplace parental leave policy includes super is also entirely up to your employer. Some companies will offer super on their entire paid parental leave policy as a benefit to staff and some will even offer it on the unpaid portion of parental leave.

According to the Workplace Gender and Equality Agency 81% of Australian employers pay superannuation for parents while on paid leave. However, only 7% pay superannuation on both employer-funded and government-funded parental leave.

It's important to check what your employer's parental leave policy includes as early as possible, so you can plan around it.

Impact of parental leave on your super balance

Taking time out of the workforce to raise children can have a significant impact on your super balance. This is because you might not be getting paid any super during the time you're off, but you're still paying most of your super fund fees.

It's not just the money you don't get paid in your regular super payments, but it's also missing out on the compound growth you would have otherwise had from those payments.

Finder analysis found taking just 1 year of parental leave from full-time work will cost the average woman $16,800 in lost super. If the mother also chooses to work a 4-day week for the first 2 years of the child's life, that figure increases to $39,500 in lost super.

The above estimates are just for 1 child. If you have 2 or 3 children and take several years out of the workforce, you could be facing much more in lost super.

What to do to if you don't earn super on parental leave

If you're planning to take time out of the workforce to raise a child, there are a few things you can do to ensure your super balance isn't impacted too greatly.

Look for a job with a better policy

Before you start trying for a family it's worth looking at your current employer's parental leave policy and how this compares to others. If your employer doesn't offer any paid parental leave, you could consider looking for a new job with a better policy. Some policies will state you need to have worked at the company for at least 12 months before being eligible for the policy, while others will have no waiting period at all.

If your workplace does offer a paid parental leave policy, check if this includes super or not. If it doesn't, this could be something you could try to negotiate with your employer (depending on the company, of course).

Consolidate your super

If you're going to go a period of time without any super contributions, you really want to make sure you've only got one fund open in your name. This is important any time, but especially while you're out of the workplace. Otherwise, you'll be paying fees on multiple super funds without contributing to any.

As you prepare for parental leave, one practical step is to consolidate your super funds. This not only simplifies your financial management but also ensures your super continues to work effectively for you during your leave.

Interestingly, many Australians find this process more straightforward than expected. Our recent Finder survey reveals how individuals across the country perceive the difficulty of finding and managing lost super, highlighting the general ease of super fund consolidation.

Finder survey: How would Australians rate the diffculty of finding lost super?

Pretty easy36.22%
I have never tried to find lost super25.39%
Somewhat difficult18.8%
Extremely easy13.19%
Very difficult6.4%
Source: Finder survey by Pure Profile of 1016 Australians, December 2023

Consolidating funds so you've just got the one will help you save a lot of wasted money in fees.

Make additional super contributions

If you're in a position to do so, making additional super contributions in the lead-up to going on parental leave can help boost your balance. Making extra contributions before you go on leave is a good way make up for the lack of super contributions while you're off.

You can make up to $27,500 worth of concessional contributions per year, which are contributions that you can make from your pre-tax income or claim a tax deduction for. This limit includes the super guarantee that your employer pays you. But unless you earn over $250,000 a year, it's likely that you can contribute a fair bit more yourself before hitting this cap.

Split super payments with your partner

While you're out of the workforce on parental leave, your partner can choose to split some of their super contributions with you.

There are 2 ways your spouse can add to you super. They can make a contribution into your super fund from their post-tax income, or they can split their own pre-tax super contributions with you (this includes those that their employer pays them).

Both options allow your partner to add money into your super fund to help boost your balance while you may not be receiving super contributions yourself.

Review your fund and investment strategy

Reviewing your super fund and investment strategy is an essential step before going on parental leave. Ensure you're in a super fund that offers low fees and strong performance to safeguard your balance, especially when not making regular contributions.

If you're taking an extended break from work, choosing a fund with minimal fees is crucial to prevent your balance from diminishing. For more options, you might want to compare super funds to find a suitable choice that aligns with your needs.

Head to our parenting hub for more family-related financial tips.

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