Federal Budget 2009 - Paid parental leave

Paid parental leave will be introduced for parents of children born or adopted as from 1 January 2011.  The leave will be paid at the federal minimum wage rate (currently $543.78 per week) for up to 18 weeks.  To be eligible for the paid parental leave, the primary carer must:

	have income of less than $150,000 in the full financial year prior to the birth or adoption
	have worked at least 330 hours over the 10 months prior to the birth or adoption and
	have worked continuously for 10 of the 13 months before the expected date of birth or adoption.

The self-employed, contractors and casual workers are all eligible.  In most cases, payments will be made through your employer, but superannuation will not apply at this stage.  The paid leave period must be taken after the birth of adoption of the child, and must be completed within 12 months of the birth or adoption.

Should the primary carer return to work before the end of the 18 week period, in some situations the remaining leave entitlements may be able to be transferred to another primary carer who meets the eligibility requirements.

If parents choose to claim parental leave payments, they will not be eligible for the baby bonus.  The exception is in the case of multiple births, where parents can claim parental leave payments for the first child, and still receive the baby bonus for the second and subsequent children.

Family Tax Benefit Part B (for single-income families) will not be available while the parental leave is being claimed. 

If your employer also offers paid parental leave or you take other forms of paid leave such as annual leave, you can still receive the government’s paid parental leave before or after the paid leave from your employer.  You cannot receive two forms of paid leave at the same time.  For employees currently entitled to paid leave under an industrial agreement, this entitlement cannot be revoked by employers during the life of that agreement.

Parents will need to carefully consider which entitlement will be better for their family.  While the total amount received under the paid parental leave system will be higher than the baby bonus, the paid parental leave will be taxable income and will be included in Centrelink’s income tests, potentially reducing family tax benefit payments.  Many taxpayers will be better off electing to remain in the baby bonus system, which is tax-free and has no impact on family tax benefit.

Published : 13 May 2009