As is currently the case, the entitlement to paid parental leave is by way of a payment by the Government. There is no obligation for employers to pay employees during parental leave, although many employers do – at their discretion – provide some form of paid parental leave to staff.
The Current Scheme
The Australian Government currently provides for a total of 20 weeks of paid parental leave for new working parents under its Paid Parental Leave Scheme. This scheme consists of two entitlements that combine to offer new parents 20 collective weeks of paid parental leave paid out at the minimum wage (Currently $812.45).
The first component is Parental Leave Pay which comprises 18 weeks leave for the birth mother or initial primary carer of an adopted child. This period of leave may be taken in two blocks, the first a continuous period of 12 weeks and the second is 30 flexible leave days that may be taken at any time in the first two years of the child’s life or adoption. In order to receive the full 12 weeks in the continuous period the leave must be commenced within the first 40 weeks of the child’s life or adoption.
The second component is Dad and Partner Pay which provides an additional 2 weeks of leave for either the child’s dad, the birth mother’s partner, adoptive parents and surrogate parents. This leave must be taken within the first 50 weeks following the child’s birth or adoption and can not be taken at the same time as any other paid leave.
Income and Work test
Both Parental Leave components outlined above require the parent accessing it to satisfy both an Income test and a Work test. The income test requires that a parent or partner claiming the paid leave have an adjusted taxable income of $156,647 or below in the 2021-2022 financial year.
The Work test requires the person accessing the paid leave to have worked for 10 out of 13 months before the birth or adoption of the child at a minimum of 330 hours a month (around 1 day a week. If there is a 12 week gap between each work day in that period the work test will not be satisfied. There are several exceptions to the Work test including if the baby is premature or you have pregnancy related sickness or illness that preclude you from working the specified hours.
In order to be able to claim these leave entitlements you must also satisfy the relevant residency rules. This rule requires that when your child is born or adopted you must be living in Australia and have on of the following;
- Australian Citizenship
- A permanent visa
- A Special Category visa
- A certain temporary visa (e.g. temporary protection visa or partner provisional)
New residents to Australia may be subject to a 2-year waiting period before they become entitled to claim under the Parental Leave Scheme.
Changes to come
In the October 2022-23 Budget Speech, the Federal Treasurer announced the “biggest expansion of Paid Parental Leave Scheme since its creation” in 2011 with $531.6 million in funding over 4 years to progressively scale up the leave until 2026 when it will reach a combined entitlement of 26 weeks (6 months).
In its Women’s Budget Statement 2022-23 the Government indicated that it intends to put “gender inequality at the heart of policy and decision making” with a focus on increasing women’s participation in the workforce. The statement outlines the proposed changes to the Parental Leave Scheme to address this as follows;
- From 1 July 2023 the Government will provide a 20-week payment to families and will maintain a portion for each parent to use on a use-it-or lose-it basis. Single parents will be able to access the entire amount;
- An additional 2 weeks will be added each year from July 2024 to July 2026 for a total of 6 additional weeks;
- The requirement that the birth parent must be the one to take the parental leave will be removed to make it easier for fathers to claim and remove assumptions about mothers and fathers being “primary” and “secondary” carers. This will allow families to decide who will claim first and how they share the entitlement;
- From July 2023 the scheme will become increasingly flexible by allowing parents to take Paid Parental Leave in blocks as small as 1 day at a time;
- From July 2023 eligibility will be expanded by altering the income test to include a $350,000 family income test under which families can be assessed if they fail to meet the current individual income test;
- Eligibility will be further expanded to allow an eligible father or partner to receive Parental Leave Pay regardless of whether the birth parent meets the residency requirements;
- To incentivize participation from fathers and partners from 1 July 2023 there will be no restrictions on fathers and partners accessing any part of the Government’s Paid Parental Leave scheme at the same time as employer-funded leave.
Need further help?
If you need further help on any of the matters raised in this article please contact EI Legal.