New parents to score $3k super boost as free childcare could be extended to more families
New parents will score a superannuation boost from next year under legislation that just passed the Senate.
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New parents will score a superannuation boost of up to $3000 under legislation that passed the Senate on Thursday ensuring that mums and dads who are eligible for government funded paid parental leave will also be paid superannuation while on parental leave.
After years of debate over the failure to pay superannuation under the maternity pay scheme, the changes mean that eligible parents with babies born or adopted on or after 1 July 2025 will receive an additional payment, based on the Superannuation Guarantee.
As the scheme expands to 26 weeks PPL, the maximum amount a family would receive in superannuation contributions for each birth or adoption will be more than $3000.
Parents will receive a lump sum superannuation payment – including an interest component – following the end of each financial year where they received Paid Parental Leave. The contribution will be automatically deposited into the superannuation accounts of eligible parents.
The existing scheme will expand to six months of government-funded Paid Parental Leave from 2026, which is often on top of their own employer-funded schemes.
Mums or eligible dads if they are the primary caregiver are paid around $900 a week and will secure an extra boost of super of around $100 a week.
The current payment for Parental Leave Pay is $183.16 a day before tax, or $915.80 per 5 day week.
“We know women retire with 25 per cent less superannuation than men – an estimated $51,700 less on average. By investing in these reforms, we are ensuring families can get the most of Paid Parental Leave, exercise more choice and flexibility and have a more secure retirement,” Minister for Social Services, Amanda Rishworth, said.
“Investing $1.1 billion over the forward estimates to pay superannuation on Paid Parental Leave is a key step in prioritising gender equality as most recipients are women who will have lower superannuation balances. The measure will directly reduce the impact of parental leave on retirement incomes.
“This reform signals that caring for babies is valued and helps to normalise parental leave as a workplace entitlement.”
Finance Minister Katy Gallagher said the Albanese Government was proud to be paying super on paid parental leave, boosting the retirement incomes of Australian women.
“We know that when women take time out of the workforce to have children, they take a hit to their super balances, retiring with 25 per cent less super than men,” Minister Gallagher said.
“This is an important statement about the value that we place on parents taking time out of the paid workforce to care for the next generations — because you shouldn’t have to sacrifice your future financial security to care for your babies.”
Free childcare could be extended to more families by Labor
It comes as Treasurer Jim Chalmers described a plan to deliver universal, ‘free’ childcare to more families with multiple children as an “important contribution” confirming that cost of living relief is on the agenda in the lead up to the next election.
The $5 billion plan to make childcare free or cheaper for low income families with one child and for families with an income of $140,000 or under if they have multiple children, is outlined in a new Productivity Commission report.
The vast majority of families – four in every five families – would receive larger discounts. Families with multiple children struggling with childcare costs would also receive a 100 per cent subsidy if they earned under $140,000.
Speaking on ABC Breakfast, Treasurer Jim Chalmers said the big question was “how do we get closer to a universal system where more people can access it.”
“We see early childhood education as a game-changer for families and for the economy,’’ he said.
“We put a lot of money and a lot of effort into making it better, but this PC report will help us consider what, if any, next steps we might be able to take.
“The Productivity Commission report recommends some next steps that we might be able to consider.
“We do want to make it easier for parents especially mums to work more if they choose to and to earn more and keep more of what they earn, that’s our motivation.”
Work activity test abolished
The report argues that early childcare can improve outcomes for children – particularly those experiencing disadvantage and vulnerability.
In a major backflip, that is why the Productivity Commission now argues that children’s participation in childcare should not depend on their parents’ work activity.
“Children experiencing vulnerability and disadvantage benefit the most from quality early childhood education and care, but they are currently the least likely to attend,” said Associate Commissioner Deborah Brennan.
“A child’s entitlement to at least three days of ECEC a week should not depend on how much their parents work.”
What parents will pay
The fee cap in Australia currently stands at $14.29 per hour for up to 100 hours per fortnight. For the first child, the PC proposes a 100 per cent subsidy for families whose combined income is under $80,000.
Some child care providers already charge above the cap which means parents still face a gap, but a 100 per cent subsidy would increase the current maximum rate of 90 per cent. Around one quarter of providers charge above the fee cap and mostly in wealthier areas.
The report recommends abolishing the activity test and increasing the rate of the Child Care Subsidy for families on incomes of up to $80,000 to 100 per cent of the hourly rate cap.
The report also recommends that governments introduce new measures to support the ECEC workforce – giving those who are starting in the sector access to tailored training options and creating better mentoring, professional development and career pathways for those who already work in the sector.
These measures, coupled with the recently announced improvements to pay, should alleviate some of the recruitment and retention challenges the sector has been experiencing for a long time.
“We will not make any progress towards a universal system without addressing the sector’s workforce challenges. Improving pay and conditions is critical but more can be done to improve career and qualification pathways for ECEC professions,” said Commissioner Martin Stokie.
Tax cuts key to getting more women into workforce
But the Productivity Commission says in the report that it’s actually welfare and tax systems that get more women in the workforce.
“Well, that’s one of the reasons why we changed the tax cuts,’’ Treasurer Jim Chalmers said on Sunrise.
“So they were better for Australian women and for parents. For people on low and middle incomes at the same time that everyone gets at the same time that everyone gets a tax cut.”
Education Minister Jason Clare said the report was another step towards universal child care.
“It sets out a road map for how we might be able to achieve that over the next decade or so,” Mr Clare said.
“What the report also says, what it really underlines, is at the moment it’s children from the most disadvantaged families that are the most likely to benefit from early education and care and the least likely to access it today.”
Originally published as New parents to score $3k super boost as free childcare could be extended to more families
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