BudgetSuperannuation and SMSF

Federal Budget superannuation changes and the impact on parental leave

Kym O'Brien
17 May 2024
3 min read

Superannuation was left largely unchanged in the Federal Budget 2024-25 announcements providing consistency and assurance to those saving for their retirement over the long term.

The changes announced generally relate to making superannuation savings more equitable and boosting retirement savings. Firstly, eligible parents will soon receive a 12% contribution of their government-funded paid parental leave towards their superannuation. Secondly, starting July 2026, employers will be obligated to pay superannuation alongside salaries and wages, intending to enhance retirement savings and address issues like unpaid superannuation.

Let’s dive into the details.

Superannuation guarantee for government-funded paid parental leave

Eligible parents will receive an additional 12% of their government-funded paid parental leave as a contribution to their superannuation fund.

The 2023-24 Federal Budget maintained the superannuation guarantee’s legislated increase to 12 per cent. From 1 July 2024, the super guarantee will increase to 11.5 per cent. It will continue to increase by 0.5 per cent on 1 July each year until it reaches 12 per cent in 2025.

In a measure designed to reduce the impact of career breaks to care for young children on retirement savings, a superannuation guarantee will be paid on government-funded paid parental leave for babies born or adopted from 1 July 2025.

The ATO will make payments directly to superannuation accounts on an annual basis from 1 July 2026. Contributions will count towards the concessional contributions cap and be taxed within the superannuation fund at the super tax rate of 15%.

This increase in superannuation contributions for eligible parents can bolster their retirement savings while still caring for their young children, potentially reducing financial strain during their retirement years.

The current superannuation system is linked to paid work so this will enhance other proposed legislation to increase paid parental leave to 26 weeks by July 2026 and seeks to minimise the impact of caring for family members on retirement incomes.

Superannuation to be paid with salary and wages

Four million Australians currently have their superannuation guarantee payments made to their superannuation fund on a quarterly basis rather than being paid at the same time as their salary and wages.

In an effort to boost retirement savings and improve workplace productivity, from 1 July 2026, employers will be required to pay their employees’ superannuation at the same time as their salary and wages.

This is designed to address an estimated $5 billion a year in unpaid superannuation by making it easier for workers to keep track of payments, reduce the risk of businesses building up large superannuation balances and for the Australian Taxation Office to monitor compliance.

The Government released a consultation paper on 9th October 2023, providing stakeholders an opportunity to provide feedback on this measure.

Measures expected but no announcements made

Unfortunately, there were no further announcements in this years Federal Budget on any the following measures:

  • Division 296 tax

  • Allowing legacy complying income stream products to be commuted

  • Relaxing residency requirements for small superannuation funds

To understand how these adjustments may impact your family and retirement plans, contact a Findex superannuation specialist today to discuss how your super might be affected and ensure financial preparedness for the future.

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.

Author: Kym O'Brien | Partner

Kym's professional background in providing structured retirement planning and risk advice spans over 20 years, having advised a wide variety of clients across a range of industries in this time. Kym believes in going above and beyond transactions to build genuine, tailored relationships with her clients.