In March 2024, the government announced plans to start paying superannuation on government Paid Parental Leave (PPL) payments beginning 1 July 2025. This initiative, part of the Working for Women: A Strategy for Gender Equality and included in the 2024-25 Budget, aims to mitigate the impact of career breaks for child care on superannuation balances and enhance equity within the superannuation system. The legislation has now been passed.

Eligible new parents who qualify 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 consists of two components:

  • Core Component: This is calculated by multiplying the total amount of PPL received by the individual in a financial year by the superannuation guarantee rate for that year. Starting 1 July 2025, the superannuation guarantee rate will be 12%.
  • Interest Component: An additional interest component will be included to compensate for the foregone returns due to the PPLSC being an annual payment.

Both components of the PPLSC will be paid to parents as a lump sum superannuation contribution after the end of each financial year in which they received PPL. Recipients of PPL will not need to claim the PPLSC; instead, the ATO will calculate it based on information received from Services Australia about the recipient’s payments. The contribution will then be automatically deposited into the nominated superannuation fund of eligible parents.

The PPL scheme is set to expand over time, increasing from 20 weeks to 26 weeks. From 1 July 2024, eligible individuals and families will receive an additional 2 weeks of leave, totaling 22 weeks. This will increase to 24 weeks from 1 July 2025 and to 26 weeks from 1 July 2026, resulting in 6 extra weeks of PPL for new parents. By 2026, 4 weeks will be reserved for each parent on a “use it or lose it” basis, encouraging shared care responsibilities. Additionally, families will be able to utilize up to 4 weeks of PPL at the same time from 1 July 2025, an increase from the current 2 weeks.

These changes to the PPL scheme will be factored into the payment of the PPLSC. Once the PPL reaches 26 weeks in July 2026, families could receive more than $3,000 in superannuation contributions for each birth or adoption. Eligibility rules for the PPL scheme can be found on the Services Australia website.

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