Planning your maternity leave

With the entrance of your newborn or adoption of your child, it’s reasonable to assume that you’re going to need some time out of the workforce. Settling into the new rhythm of life with a child will take some getting used to and added to this, your body might need some recovery time! So, it’s best to start having those conversations around your maternity leave early on with both your partner and your employer.

The Parental Leave Pay (PLP) scheme maintained by the Australian Government entitles you to take 2 periods of leave, 1 set period and 1 flexible period, within 2 years of the birth or adoption of your child. As an Australian resident, if you meet the income and work test, you are eligible for up to 18 weeks of the PLP, which is paid at the National Minimum Wage. The good news is that if your parental leave is also employer-funded, you are still entitled to the PLP. The first period of PLP has to be used within 12 months of the birth or adoption of your child and is a set period of 12 weeks. Whereas, the second period of PLP can be taken within 24 months and allows 30 days of flexible income where needed.

This compliment to your cashflow is definitely a nice cushion but depending on how long you need to leave the workforce, it may not be sufficient. According to the ABS’ 6 yearly survey ‘Pregnancy and employment transitions’, the average is around 32 weeks leave so this could be a good indicator of how much leave you might need. Some other considerations that need to be taken into account are your superannuation, salary splitting and other government assistance that could help you financially recover from childbirth.

A 2016 Senate report found that one in three women are retiring with no super at all. This is creating a social crisis for older women who spend their later years, living in poverty. One of the biggest causes to this issue is that no contributions are made towards women’s super when they are taking time out of the workforce for childbirth or raising children. Some consideration should be given to a few potential options:

• You could salary sacrifice for 3-5 years prior to giving birth. Even small contributions of $1,000 – $3,000 could significantly improve your life at retirement, due to the benefit of compound interest.

• While you’re out of the workforce, your spouse or partner could made contributions on your behalf, which can also be a tax- effective option for your partner.

• If you’re living on the PLP after giving birth, earning less than $37,000 and you’re able to set aside some extra cash (after-tax) to contribute towards your superannuation – the government will also contribute on your behalf e.g. For $1,000, the government contributes a maximum of $500. The great thing too is that you don’t need to file any paperwork to receive this extra government contribution, it will be automatically calculated on your tax return.

Some other assistance that you might be eligible for that could ease any financial burden, includes a parenting payment, rent assistance and a health care card. You should also be a relevant candidate for the Family Tax Benefit, of which a newborn upfront payment and a newborn ‘supplement’ is included. The amounts you receive through these avenues will depend on your household income and how many children you have.

A big conversation to be had is with your partner, if you’re foreseeing to be out of the workforce for a few years, is to talk about the option of salary-splitting. If you’re both very keen to maintain financial independence, you’ll need to consider transitioning your mindset to a more family-centric viewpoint.

Figuring out what works for your household will be unique to each situation but a few ideas could be:

• Splitting bills and expenses based on income ratios (eg. your partner could pay 70% of items to your 30% if that equates to the level of incomes).

• Whatever amount of money is left after paying your combined bills, expenses & setting aside savings, could be split evenly to allow for a sense of independence, leisure and security for the both of you.

• If you have a joint bank account, try to be actively involved in the management of the money and be realistic about your own needs even if you’re not earning income for some time.

Approaching maternity leave with both your employer and your partner requires some ability to be flexible and assertive. Some out-of-the-box thinking never goes astray when trying to come to terms with what will work for you… Perhaps you could add your annual leave onto the end of your maternity leave? Perhaps you could take half pay for double the amount of time? Depending on your employment situation, you should try to find the right fit for all those involved while making sure that you don’t get left behind, financially!