Australia: Employers To Be Paymaster Of Government's Paid Parental Leave Scheme

Last Updated: 2 July 2010
Article by Kathy M. Dalton and Gerard Phillips

Paid parental leave


Under the new legislation, eligible working parents who have a child born or adopted after 1 January 2011 will be entitled to be paid up to 18 weeks pay at the national minimum wage rate, which will be A$569.90 gross from 1 July 2010.

The scheme will be available to persons who are the primary carer of the child, have satisfied attendance requirements and who have a taxable income of A$150,000 or less in the previous financial year.

Employers will be "paymaster"

The payments will be funded directly by the Government and not employers, but employers will have administrative responsibilities. Employees who wish to access the regime will need to lodge a claim with the Family Assistance Office (FAO). The FAO will then send a notice to the employer advising them if they are required to provide the employee with parental leave pay. If the employee has an entitlement, the FAO will provide the necessary funds to the employer which will then be required to act as a "paymaster" and forward them onto the employee.

Parental leave pay will need to be treated in the same way as other taxable income, that is PAYG amounts will need to be withheld from the payments at the appropriate rate. However, employers will not be required to make superannuation contributions in respect of parental leave pay.

Parents will be able to lodge their claims up to three months before the birth or adoption of the child, although payments will not begin until after the birth or adoption. The first claims for paid parental leave may therefore be lodged from 1 October 2010 for children expected to be born or adopted on 1 January 2011.

A six month transitional period will apply whereby employers will not be required to administer payments until 1 July 2011 unless they elect to "opt-in" with respect to administering the scheme prior to this date. If an employer does not "opt-in", employees may claim directly from the FAO during the transitional period.

Scheme is in addition to existing entitlements

Importantly, any parental leave payments made under the scheme are in addition to and not in place of any other existing legal obligations an employer may have to provide paid parental leave entitlements. This means that employers cannot use the statutory scheme to off-set any paid parental leave benefits they are legally required to provide employees. For example, if an employer has a contractual or award obligation to provide paid parental leave benefits, the Government scheme will be in addition to those entitlements. However, if an employer has a non-binding policy regarding paid parental leave, it will be open to the employer to vary that policy to take into account the statutory scheme.


The Fair Work Ombudsman will have the power to investigate employers that have allegedly failed to make parental leave payments to eligible employees or otherwise do not meet their obligations under the scheme. Breaches of the scheme may attract a maximum penalty of A$6,600 for individuals and A$33,000 for corporations.

Implications for employers

Employers should consider whether they wish to "opt-in" with respect to administering the scheme prior to 1 July 2011 and take steps to inform themselves of their responsibilities under the new legislation.

Given that parental leave payments made under the scheme are in addition to and not in place of any legal obligations, an employer may have to provide paid parental leave entitlements. Employers should consider their current obligations with respect to paid parental leave.

With respect to non-binding obligations, such as an entitlement under a workplace policy, employers should consider reviewing such arrangements in light of the new paid parental leave scheme. For example, employers may wish to scale back their obligations under their existing workplace policies. Employers may also wish to review any paid parental leave entitlements provided by their standard contracts of employment for new employees in light of the statutory scheme.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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