Thinking about financials is important when you prepare to have a baby. Did you know that your employer doesn’t have to include superannuation contributions with your maternity leave payments?
Career breaks are something most women consider inevitable if they’re planning to have children, and not thinking ahead could have dire consequences on your super.
Did you know that your employer doesn’t have to include superannuation contributions with your maternity leave payments? Employers aren’t legally obligated to pay you super when you go on maternity leave.
Despite the paid parental leave pay meeting the $450/month threshold for SG payments (Super Guarantee is the 9.5% of your salary that your employer has to pay into your super), paid leave does not include super contributions. The assumption that super is included in paid leave may be a reason for women not contributing to their super during their career breaks.
What does a lack of super during your career break mean for you?
Women who take career breaks and don’t contribute to their super will face two problems:
1. They are not reaping the benefits of consistent contributions compounding over the life of their super and;
2. Although they’re not making contributions, their fund will continue to charge fees, slowly depleting your balance.
When taking a look at the average super balance for parents, the obvious difference between male and female parents is stark, with the biggest difference forming between the ages of 30-35 when women are most likely taking career breaks. That dip then adversely affects future compounding interest returns, ultimately resulting in a lower end balance.
“The assumption that super is included in paid leave may be a reason for women not contributing to their super during their career breaks.”
Here’s what you can do to nurture your super when you take a career break:
1. You can plan ahead of a career break to make sure you are able to contribute to your super. One of the reasons many women find their super stagnating is due to a lack of planning ahead, and this has been found to cost them up to $160,000*. The consequences of missing out on so much extra money can be devastating, with women aged 55+ being Australia’s fastest-growing homeless demographic. The ability to be independent and afford a comfortable retirement is at risk when you leave you super alone during a career break.
2. A strategy to consider is to contribute 9.5% of your paid leave payments into your super, or perhaps match your previous salary’s payments, if you can afford to. Did you know that your spouse can help you out with your super? They’re able to get a $540 tax offset on the first $3,000 they contribute as well.
3. Your partner is also able to split their concessional contributions (i.e. pre-tax contributions from your employer and/or salary sacrificing) with you. You can read more about this here.
So, in addition to all the other ways in which you’re preparing for your newborn - painting the nursery, attending antenatal classes and stocking up on nappies - make sure you take the time to review how you’ll address your super whilst on parental leave. The decisions you make now can ensure you don’t lose out on tens of thousands of superannuation dollars, and can enjoy your well-deserved retirement.