Taking time away from paid employment — whether for parental leave, caring responsibilities, study, illness, or travel — can significantly affect your superannuation balance. Understanding the impact and your options helps minimise the long-term cost.
Why Career Breaks Hurt Super More Than You Think
Super relies on compounding returns over a long period. Every year without contributions is not just the lost contribution itself — it’s also the investment returns that money would have generated for the remaining years of your working life.
Example:
- $15,000 not contributed at age 35
- Invested at 7% for 25 years (to age 60)
- That $15,000 would have grown to approximately $81,000
Even a single year out of the workforce can have a disproportionate impact on your final super balance.
What Happens to Your Super During a Career Break?
- No employer SG: If you’re not employed, no employer super is required
- Balance continues to be invested: Your existing super keeps growing (or fluctuating) based on your investment option
- Fees and insurance premiums continue: These are deducted from your balance even without new contributions
- Insurance may be cancelled: Under the Protecting Your Super reforms, accounts inactive for 16 months may have insurance cancelled
Super During Paid and Unpaid Parental Leave
Paid parental leave (employer-funded): SG is generally payable during employer-funded paid parental leave (since 1 July 2023, the Government also pays SG on the government Parental Leave Pay scheme from 1 July 2025).
Unpaid parental leave: No SG obligation. This is where the gap occurs — particularly for primary carers (typically women) who take extended unpaid leave.
Strategies to Reduce the Super Impact
1. Personal Voluntary Contributions
If you have savings or a partner’s income, make personal (non-concessional) contributions to your super during the break. These can be made in lump sums.
2. Spouse Contributions
Your partner can make spouse contributions on your behalf (after-tax). They may be eligible for a spouse contribution tax offset of up to $540 if you earn less than $37,000 and your partner contributes at least $3,000 on your behalf.
3. Government Co-contribution
If you earn below $58,445 and make personal (after-tax) contributions, the government co-contribution may provide up to $500 for every $1,000 you contribute (reducing proportionally above $43,445).
4. Catch-Up Concessional Contributions
If your super balance is below $500,000, you can use unused concessional cap amounts from the prior five years. On return to work, salary sacrificing to catch up on missed contributions can be an effective strategy.
5. Salary Sacrifice on Return
When you return to paid employment, maximising salary sacrifice contributions using the carry-forward catch-up provisions can partly offset the contribution gap.
Insurance: Check Before You Go on Break
If you stop receiving SG contributions for 16 months, your super fund’s insurance (death, TPD, IP) may be automatically cancelled under the Protecting Your Super rules. Before a career break:
- Contact your fund and elect to keep insurance active
- Consider whether income protection inside super is suitable during a career break (you need employment income to cover)
For more: Salary Sacrifice Super, Spouse Contributions, Super for Women, Super and Redundancy. For advice on your situation, speak with a licensed financial adviser via MoneySmart.