According to Senior Financial Planner Amanda Ragkousis, ‘Australia is making a significant move towards achieving gender equality and economic stability for families’ by implementing superannuation co-contributions in its Paid Parental Leave (PPL) Program. The initiative is part of a 10-year economic equality plan proposed by the Women’s Economic Equality Taskforce.
Ragouskis outlines that ‘The reform’s main goal is to normalise parental leave as a standard workplace entitlement, just like annual and sick leave, and aims to tackle a longstanding constraint for parents taking longer parental leave—the cumulative disadvantage at retirement caused by a long pause in super contributions. The continuation of super contributions within PPL is designed to bridge this gap and provide a boost at retirement.’
Overdue But a Great Step Forward
Financial Advisor Jess Robinson says these reforms are overdue but are a ‘great step forward’ in bridging the gender gap.
‘As a mother of two young children who has used the PPL scheme twice in the past five years, I believe the initiative is long overdue, although it is a great step in the right direction for women and mothers.’
Starting July 1, 2024, the new scheme will introduce four weeks each of maternity and paternity leave, tailored for mothers or primary caregivers and fathers or partners, respectively. It will also feature up to 20 weeks of parental leave, incrementally increasing until it reaches 26 weeks by 2026. The compensation during this leave will be pegged to the national minimum wage, ensuring families receive adequate support during this critical time.
From July 1, 2025, the government will also begin making superannuation co-contributions, addressing the superannuation gap currently experienced by women. The superannuation balance gap between men and women is approximately 22-25% for those aged 30 to 39. This gap increases to 38.1% for those aged 40-44.
A gap that the financial adviser outlines has been contributed ‘by women taking career breaks to raise their children. or moving from a full-time role to part-time, reducing their salaries and superannuation guarantee contributions.’
‘This is not just a short-term impact, either, with mothers generally working as ‘full-time mums’ or part-time for an employer until all children commence primary school, at which point they still require reduced school-based hours or are not returning to the workforce until children have finished their schooling.’
‘However, with more employers and services Australia now offering for men also to take part in parental leave schemes, hopefully, these gaps will begin to reduce over time.’ says Robinson
Stark Variation in Employer-Provided Parental Leave
In Australia, only about 60% of businesses offer employer-provided parental leave, and there’s a stark variation in the duration and compensation offered. Government entities, universities, and large consulting firms often offer more generous benefits. On the other hand, industries like retail and construction lag. In some cases, unless employed permanently, access to any form of employer parental leave is almost non-existent.
Working With A Financial Adviser Can Help Maximise You and Your Partner’s Super
Melbourne-based Financial Advisor Shane Fisher has taken the opportunity to examine more ways that families can maximise their retirement savings and balance superannuation between partners.
‘Superannuation contribution splitting is a common strategy to manage the balances between partners. This process allows one partner in a relationship to transfer a portion of their superannuation contributions to their spouse’s superannuation account. It is typically used to equalise superannuation savings between partners, especially if one partner has a significantly higher balance or if there’s a desire to optimise tax and retirement planning.’
Before deciding to split superannuation contributions, couples must consider their overall financial situation, retirement goals, and tax implications. Seeking advice from financial advisors or retirement planners can help ensure that contribution splitting aligns with their long-term objectives.
Rolling Out in Stages
The Government reforms will roll out in stages. The first stage will occur later this year, with the extension of the duration of paid parental leave and the additional mandated superannuation co-contributions to commence mid-next year.
If you would like to chat with an advisor and uncover strategies to maximise your super, then please do not hesitate to book a time by clicking here or emailing enquiries@viridianadvisory.com.au.