Extra paid parental leave is welcome, but it’s still missing one thing

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Over the last few weeks I’ve ranted a few times about the cost of child-rearing, so I’ve decided to stay on theme this week given that families will soon be able to access an increased amount of paid parental leave. On Thursday this week laws introduced to parliament will allow parents to access six months of paid parental leave by 2026.

I think we all can agree that these amendments to the paid parental leave in Australia are not just a policy change; they are a statement – a recognition of the value of nurturing families and paving the way for a brighter, healthier future.

As we laud the progress we’ve made on parental leave, I believe there has been a massive oversight that the government should address.Credit: Dionne Gain

Starting from July 2024, Australian families will see an incremental increase of two weeks each year in their paid parental leave. By 2026, they’ll be entitled to a full six months. Notably, while this leave can be shared between parents, each will have a dedicated four weeks, emphasising the role of both parents in caregiving – a step in the right direction if you ask me.

This isn’t just a financial benefit but a societal shift. As Social Services Minister Amanda Rishworth aptly remarked, paid parental leave isn’t only vital for families and women, but is crucial for our economy. And the numbers prove it because a staggering 180,000 families will benefit from this each year.

I’ve been seeing comments since this announcement, that these steps still aren’t good enough, so before I go any further I wanted to reflect on the privilege we already have with our parental leave policy here in Australia.

When we look globally, parental leave policies vary dramatically. In some countries, new parents enjoy an entire year of paid leave, while others offer mere weeks or even none at all. It’s easy to dwell on what we might lack compared to others. But it’s important to remember the essence of gratitude and recognise what we have. This doesn’t mean we shouldn’t strive for more but instead means we should move forward with a positive perspective.

With the welcome extension of paid parental leave, the discussion on superannuation during this period becomes even more pertinent.

Yet, as we laud this progress – progress that I am insanely grateful for – I believe there has been a massive oversight: superannuation. Superannuation is the bedrock of our retirement. It is, for many, going to be the largest asset they will retire with and yet, it hasn’t been taken into consideration when talking about time being taken out of the workforce.

Sadly, there is still a significant discrepancy between the amount with which men and women retire. The fact is, women in Australia earn $1 million less on average over their lifetimes than men, and retire with $136,000 less in superannuation. This gap isn’t merely a financial divide; it’s a testament to the time women often take away from the workforce, typically to raise families.

With the welcome extension of paid parental leave, the discussion on superannuation during this period becomes even more pertinent. Women, already facing wage gaps and career breaks, are further disadvantaged when it comes to retirement savings.

It’s crucial to consider paying super during parental leave, ensuring that while women take time off for their families, their future financial security isn’t compromised.

In the years leading up to retirement, the gap between men and women when looking at superannuation balances can be anywhere between 22 per cent and 35 per cent. The median superannuation balance for men aged 60–64 years is $204,107, whereas for women in the same age group it is $146,900, a gap of 28 per cent.

For the pre-retirement years of 55-59, the gender gap is 33 per cent, and in the peak earning years of 45-49 the gender gap is 35 per cent. From my perspective, if a change to the paid parental leave scheme was going to be made it should have included superannuation concessions to work towards closing the retirement gap.

Just because superannuation wasn’t taken into consideration with this iteration of the paid parental leave policy doesn’t mean you shouldn’t be thinking about it. It’s important, incredibly so.

So if you’re wondering how to navigate super contributions during leave – it’s possible! You can make voluntary contributions to your super account easily while you’re not working – it’s as simple as making a BPAY transfer to your fund. If your individual budget or personal circumstances don’t allow that, partners can step in.

If eligible, you can generally make a contribution to your spouse’s super fund and claim an 18 per cent tax offset on up to $3000 through your tax return – a nice little money win you probably weren’t expecting when saving for retirement. Not only does this make financial sense, but it also reinforces the idea of parenting and family as a shared responsibility.

Returning to the parental leave advancements, the voices from various sectors highlight the significance of these changes. Jessica Rudd, CEO of parent advocacy group The Parenthood, rightly pointed out that the initial year of a child’s life is transformative. However, she and many others believe that a full year of paid parental leave, split between two caregivers if applicable, would be ideal.

Business leaders too, like Bran Black of the Business Council of Australia, emphasise that such flexibility can potentially unlock greater female participation in the economy, adding a staggering $128 billion annually.

Yet the echoes from the Minderoo Foundation’s Thrive By Five initiative rings true – even with these changes, Australia’s paid parental leave entitlements are comparatively low. And while we celebrate the progress, we must also remain steadfast in our commitment to further enhancing the support for families. So while we’re grateful for what we already have, there are still so many things that could be happening to help families and women.

Don’t get me wrong, the recent changes in Australia’s paid parental leave are undeniably a beautiful step forward. It not only strengthens financial support for families but also marks a societal evolution in recognising the shared responsibilities of parenting.

However, as we appreciate this progress, it’s vital to keep an eye on the broader picture, addressing areas like superannuation and ensuring that our families, especially our women, are equipped for a secure future. Let’s not just aim for a seat at the global table but strive for a leading role in nurturing and supporting our families.

Victoria Devine is a former financial adviser, bestselling author, and host of finance podcast She’s on the Money. She is also the founder and co-director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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