Paid Parental Leave – a small scheme for small businesses?
Australia’s first national Paid Parental Leave scheme, with effect from 1 January 2011, is great for parents, but what are the effects on small business?
Paid Parental Leave payments are:
- government funded;
- for eligible working parents of children born or adopted on or after 1 January 2011;
- transferable to the other parent;
- paid at the National Minimum Wage – currently $570 a week before tax;
- paid up to 18 weeks;
- available to be taken any time within the first year after birth;
- available for the primary carer of a newborn child or recently adopted child;
- for Australian residents who have met the Paid Parental Leave scheme work test before the birth or adoption occurs, have received an individual adjusted taxable income of $150,000 or less in the previous financial year, and are on leave or not working from the time they become the child’s primary carer.
The birth mother or the initial primary carer of an adopted child must make the claim for Parental Leave Pay, unless there are exceptional circumstances. A child’s primary carer is the person who is most meeting the child’s physical needs. This will usually be the mother of a newborn child or the initial primary carer of an adopted child.
A person may still be eligible for Parental Leave Pay in the event of a stillbirth or infant death.
The birth mother can receive Parental Leave Pay for up to 18 weeks after the birth even if they are not the primary carer of the child in some circumstances. This may occur if they are unable to care for the child due to illness, or is the birth mother in an adoption or surrogacy arrangement.
Payroll tax is paid according to which State or Territory the worker and employer reside. Even though PPL payments are paid by employers, some State Revenues view they do not constitute wages under the relevant payroll tax legislation and are therefore not liable to payroll tax. This is because these payments are not paid by the employer in respect of services provided by the employee or in anticipation of future services to be provided by the employee, rather they are Commonwealth Government payments that employers are asked to pay on its behalf. It is recommended to speak to a lawyer to find out if this view is relevant in your small business.
The Paid Parental Leave scheme work test
To meet the Paid Parental Leave scheme work test an employee must have:
- worked for at least 10 of the 13 months prior to the birth or adoption of the child, and
- worked for at least 330 hours in that 10 month period (just over 1 day a week), with no more than an 8 week gap between 2 consecutive working days (a working day is a day worked for at least one hour).
The employee does not need to be working full-time to be eligible for Parental Leave Pay, they can be part-time, casual or seasonal worker, a contractor or self-employed; work in a family business such as a farm; have multiple employers; or have recently changed jobs.
Exceptions to the work test include meet it due to pregnancy complications and/or premature birth.
If your small business is a family business (such as a farm), hours of work that do not generating any income can be included, providing they are undertaking the work for financial gain or benefit.