Super on government-funded paid parental leave: year-end planning

The Australian Government will begin paying superannuation contributions from 1 July 2026 for individuals receiving government-funded paid parental leave from 1 July 2025. This aims to improve retirement outcomes for parents, particularly women, who often experience reduced superannuation growth when they take time out of the workforce for parenting.

Although these contributions are fully government funded and administered, paid parental leave super has important implications for business owners’ year-end planning. Understanding how the rules operate will help you prepare for workforce needs, budgeting and employee wellbeing.

What changed from 1 July 2025?

Paid parental leave super now applies for parents of children born or adopted on or after 1 July 2025. The government contributes superannuation to the employee’s nominated fund at the superannuation guarantee rate of 12% (plus an interest component).

These super contributions are not paid at the same time as the paid parental leave income. Instead, the ATO will pay them after the end of the financial year in which the parent received paid parental leave income. The first contributions are expected from July 2026, covering paid parental leave received during 2025–2026.

The contributions are taxed within the fund at 15% and count towards the individual’s concessional contributions cap, in the same way as employer superannuation guarantee contributions.

Why this matters for business owners at year-end

Employers aren’t required to fund or process these super contributions, but paid parental leave super still affects financial and workforce planning.

Workforce costs and retention planning

Government-funded paid parental leave super doesn’t appear in your payroll costs. However, as employees become more aware of paid parental leave super, some employers may choose to pay super on employer-funded parental leave or expand existing entitlements to stay competitive. These decisions can influence remuneration strategy and budgets for 2026–2027.

Attracting and retaining employees

Paid parental leave benefits – including how employers top up or complement the government scheme – are increasingly visible to job seekers and staff. As you review year-end HR reports, check whether your parental leave offering remains competitive and clearly communicated.

Staff planning and communication

Employees who have taken or planned paid parental leave during 2025–2026 may ask whether they’ll receive super on paid parental leave, when it will be paid, and how it interacts with their existing super and caps. Clear internal guidance helps managers and HR answer questions confidently and plan for staffing and backfill arrangements.

Compliance clarity

There’s potential for confusion between employer-funded super (currently paid at least quarterly and not compulsory on employer-funded parental leave) and government-funded paid parental leave super paid annually by the ATO to recipients of government-funded paid parental leave. Ensuring your policies and communications clearly distinguish between these two streams can help reduce misunderstandings.

How business owners can prepare

Business owners can take practical steps before 30 June 2026.

Review policies and documentation

• Update parental leave, HR and payroll policies to reflect that superannuation is paid on government-funded paid parental leave by the government, not the employer.
• Clarify whether your business pays additional super on employer-funded parental leave.
  Brief HR, payroll and managers
• Ensure HR and payroll teams understand the timing of paid parental leave super contributions so they can answer employee questions accurately.
• Provide talking points or FAQ lists for managers.

Incorporate into planning

• As you plan year-end reviews and 2026–2027 budgets, consider whether you wish to enhance parental leave as part of your attraction and retention strategy.
• Factor any changes into cash flow forecasts and HR plans.

Encourage accurate super details

• Remind employees who’ve taken or are planning paid parental leave to keep their super fund details up to date with Services Australia and your payroll records. This helps reduce delays when the ATO begins paying paid parental leave super after year-end.