New paid parental leave benefits unveiled in Federal Budget

A federal election is in the air, which means it’s time for business to be on the lookout for policy announcements that might impact their business. Federal Treasurer Josh Frydenberg’s Budget speech contained a raft of announcements business needs to consider, including proposed changes to the paid parental leave (PPL) scheme.

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What is proposed?

The changes announced by the Treasurer to paid parental leave will see a merging of the current entitlements:

  • 18 weeks paid parental leave for primary carers
  • Two weeks pay for secondary carers

Both are payable at a rate based on the national minimum wage. The new arrangement will create a single entitlement to 20 weeks paid parental leave, which families can divide between parents as they see fit. Single parents will also receive the benefit of 20 weeks paid parental leave.

It’s important to note the current scheme does not create a new entitlement to leave, merely the right to payment from the government at a rate based on the minimum wage while taking some other type of paid or unpaid leave, such as paid maternity leave under an employer policy, annual leave, or unpaid parental leave under the Fair Work Act 2009.

While we are waiting for more detail, we do not expect this will change.

When is this happening?

According to the Budget papers, the change won’t be introduced until 1 March 2023 at the latest. The key takeaway for employers is to monitor these changes but understand that no specific action is needed just yet.

When can the leave be taken?

We do not expect any changes to the current rules around when PPL can be taken. This is currently within two years from the birth or adoption of a child.

How will the leave be paid?

We anticipate the current arrangements for payment of PPL will remain. That is, parents will need to apply via Services Australia, and talk to their employer to agree when leave will be taken.

Who is eligible?

Both parents of a newborn or newly adopted child will be eligible, and we expect the current work and residency tests will continue to apply, but changes have been announced to the income test (see below).

Single parents will also be eligible to receive the 20-week entitlement, up from 18 weeks currently.

Is the income test changing?

Yes.

Currently, mothers who earn up to $151,350 can access parental leave even if their partner earns a high income. A family in which the mother earns more than $151,350 is not entitled to parental leave pay even if their partner earns a low or no income.

The new $350,000 ‘household income eligibility test’ addresses this inconsistency by applying a household-wide income test.

Why is the government doing this?

The government’s stated objectives in the budget papers are to:

  • reflect the needs of today’s families
  • reduce complexity for working families
  • promote equality between mothers and fathers
  • empower families to make their own decisions without being restricted by definitions of primary and secondary carer.

What do employers need to do?

For now, the short answer is nothing. The scheme will not be introduced until 1 March 2023 at the latest.

However, as with any proposed change, this would be a good time to review your PPL policies and arrangements to ensure they remain compliant and understand what you might need to change when the proposed changes are introduced.

The Victorian Chamber will continue to lobby government to ensure the voice of business is heard and considered on this and other changes.

Employers who want to better understand their paid parental leave obligations can contact the Victorian Chamber’s workplace relations advice line on 03 8662 5222.

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