Superannuation contributions on paid parental leave: what employers need to know

Starting 1 July 2025, the Australian Government will begin making annual superannuation contributions on government-funded Paid Parental Leave (PPL). This is a key move aimed at enhancing retirement savings—especially for women, who typically experience reduced super balances due to time taken off for caregiving.

What’s Changing?

Super Contributions on PPL

• Parents of children born or adopted on or after 1 July 2025 will receive superannuation contributions from the government.

• The contribution will be equivalent to the Superannuation Guarantee (SG) rate, which will be 12% from 1 July 2025.

• Contributions apply only to the government-funded PPL, not employer-funded leave.

Payment Timeline

• The ATO will deposit the contributions directly into the individual’s nominated superannuation fund.

• Payments will be made after the end of the financial year in which PPL was received.

• The first payments are expected to begin from July 2026.

Taxation & Caps

• Contributions will:

  • Be taxed at 15% within the super fund.

  • Count towards the individual’s concessional contributions cap.

What’s Not Changing

Employer-Funded Leave Still Discretionary

• Employers are not required to pay SG on salary or wages paid during parental leave.

• Superannuation on employer-funded parental leave remains at the employer’s discretion.

• Under current laws, salary/wages paid for parental leave are excluded from mandatory SG calculations.

• However, employers may choose to make voluntary contributions during this period.

What Businesses Should Do

Although the ATO handles the payments, employers play a vital role in ensuring a smooth transition and supporting their staff. Here's how businesses can prepare:

• Be informed:
  Understand that while you don’t calculate or pay the super contributions yourself, knowing the rules helps you assist your employees.

• Update internal policies:
  Review and revise parental leave policies to reflect the new government contributions.

• Educate your teams:
  Make sure HR and payroll staff are fully aware of the changes so they can respond to questions accurately.

• Communicate clearly:
  Let eligible employees know about the upcoming changes. Remind them to update their super fund details if needed.

• Consider offering more:
  While it’s optional, you may choose to make additional contributions during parental leave as a show of support for employee financial wellbeing.

• Stay current:
  Monitor updates from the ATO and Services Australia for any changes or new guidance on implementation.

Looking Ahead

This reform represents a major step toward closing the gender superannuation gap and providing greater financial security to parents. By preparing early, businesses can demonstrate leadership in promoting equity, wellbeing, and employee support.

For more details on the Paid Parental Leave scheme, visit the Centrelink website.