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Parental leave pay has an impact on social security, family assistance and veterans' payments and other entitlements.
An eligible person can receive either baby bonus or parental leave pay for a particular child.
A person cannot be eligible for baby bonus for a child if a PPL period (1.1.P.130) for the child has started for a person or their partner. This also applies if a PPL period for the child started for the person's former partner at a time when they were members of a couple.
Only one child in a multiple birth or adoption can attract parental leave pay. Therefore, subject to eligibility criteria, baby bonus will remain available for other children in circumstances of multiple births or where 2 or more children are adopted as part of the same adoption process.
Families that choose parental leave pay will not be able to receive FTB Part B (1.1.F.20) during the PPL period (of up to 18 weeks). However, depending on income and other eligibility criteria, they may continue to receive FTB Part A during the PPL period. MIA will also continue to be available, subject to the eligibility criteria for that payment.
New parents who are not eligible for parental leave pay will continue to receive, if eligible, baby bonus and FTB Part B in addition to FTB Part A and MIA.
An estimator is available on the Family Assistance Office website enabling families to enter information about their individual circumstances, such as income and other family details, to assist them in making an informed decision about choosing either parental leave pay or baby bonus and other family assistance payments.
Act reference: FAAct section 3(1) Definitions, section 36 When an individual is eligible for baby bonus in normal circumstances, section 36A Effect of favourable review of payability determinations etc. for parental leave pay, section 66A Amount of baby bonus to take into account parental leave pay of others, schedule 1 clause 28C Paid parental leave
Policy reference: PPL Guide 2.10.2 Individuals Claiming Baby Bonus Only Must Indicate They Do Not Wish to Claim Parental Leave Pay
FA Guide 2.4.1 Eligibility for Baby Bonus, 3.1.9 FTB Part B Rate Calculation, 2.2.1 FTB Eligibility Criteria for Individuals, 2.5.1 MIA Eligibility
Income support: Parental leave pay is excluded from the definition of 'income' in SSAct section 8 and does not affect a person's income support payments.
Similarly, parental leave pay does not affect the rate of a person's service pension or income support supplement payable under the Veterans' Entitlement Act 1986 nor the exceptional circumstances relief payment and farm help income support provided through the Farm Household Support Act 1992.
ABSTUDY: Parental leave pay is excluded from the definition of 'income' for the personal and partner income tests. For the parental income test, parental leave pay is taxable income and is therefore included in a person's ATI (1.1.A.40) in assessing entitlement to dependent ABSTUDY.
Assistance for Isolated Children (AIC) Scheme: Parental leave pay is included in assessing entitlement to means tested Additional Boarding Allowance.
Carer payment: Parental leave pay is included as income under the income test for care receivers.
Child support: Parental leave pay is taxable income and is therefore included in a person's ATI for purposes of assessing the annual rate of child support payable for a child or children.
Family assistance: Parental leave pay is taxable income and is therefore included in a person's ATI for purposes of applying the relevant income tests.
Health care cards: Parental leave pay counts as income for the purposes of applying the seniors' health card and claim based (low income) health care card and the veterans' seniors health care card income tests.
Youth allowance: For the parental income test, parental leave pay is taxable income and is therefore included in a person's ATI (1.1.A.40) in assessing entitlement to dependent youth allowance.
Act reference: SSAct section 8(1) Income test definitions, section 8(8)(c) ...value of emergency relief or like assistance, section 1071A-4 Health Care Card Income Test Calculator - Definitions
FAAct schedule 3 Adjusted taxable income
Child Support (Assessment) Act 1989 section 43 Working out parent's adjusted taxable income
Veterans' Entitlements Act 1986 section 5H Income test definitions
Income maintenance period: In applying the income maintenance period, which affects DSP, youth allowance, Austudy payment, newstart allowance, widow allowance, sickness allowance and parenting payment, parental leave pay is not considered to be a 'leave payment'; however, for the purposes of the severe financial hardship provisions applying to the income maintenance period, parental leave pay is included in consideration of a person's or a couple's liquid assets.
Income management: Parental leave pay is not subject to income management.
Deductions from parental leave pay: The Child Support Agency (CSA) has the ability to intercept parental leave pay and deduct child support liabilities and debts from parental leave pay whether paid by an employer or by the FAO. The deduction rules for employer paid and FAO paid parental leave pay are the same except where the CSA is seeking deductions in respect of child support debt alone from an employer. In all cases apart from this, the Protected Earnings Amount (PEA) must be left after tax and child support are deducted, i.e. if the person is receiving less parental leave pay than PEA, then no child support can be withheld from the payment. Where deductions are sought by the CSA from an employer in respect of child support debt alone, CSA's policies as to the amount of deduction will apply.
Recovery of parental leave pay debts: Parental leave pay debts can be recovered from the debtor's social security payments or from a third party's social security payments, with their consent, and from Veterans' income support payments, with consent. These debts can also be recovered by deductions from the debtor's instalments of FTB or from their entitlement to family assistance or from a third party's instalment of FTB or entitlement to family assistance with their consent. However, existing restrictions relating to recovery from CCB and child care rebate remain.
Parental leave pay amounts are assessable income for employers and the employer is entitled to a tax deduction when amounts are paid to employees. Reasonable costs of complying with the PPL scheme (e.g. the deductible component of software expenses) are also deductible being expenses necessarily incurred by the employer in carrying on a business.
Employers are not obliged to make superannuation guarantee payments on parental leave pay paid to an employee and parental leave pay has no goods and services tax or capital gains tax implications for the employer or individual recipient. However, parental leave pay is taxable in the hands of an individual and regarded as income, except for purposes of income support entitlements. Employees are able to salary sacrifice parental leave pay where their employer offers such an arrangement and the parental leave pay is paid by the employer.
Where the employer pays parental leave pay, the employer is required to withhold PAYG amounts at the appropriate rate for the employee, consistent with their withholding obligations for other pay and allowances paid to the employee. Where the parental leave pay is paid by FAO, the FAO is required to withhold amounts as tax, either at the default rate of 15 per cent or the rate nominated by the recipient.
Employers are not required to pay payroll tax in respect of instalments of parental leave pay paid to an employee.
In general, taxpayers are not entitled to dependent spouse, child-housekeeper or housekeeper tax offsets, for that part of the year that parental leave pay is payable to the taxpayer or his or her spouse. However, a taxpayer with a spouse in receipt of DSP is eligible for a housekeeper tax offset if they or their spouse is in receipt of parental leave pay and the housekeeper is engaged in caring for the spouse.
Act reference: Income Tax Assessment Act 1997 section 159JA Rebates for dependants-reduction because of certain other benefits, section 159LA Rebates for housekeepers-reduction because of certain other benefits
SSAct section 1064-F14 Ordinary income for the purposes of DSP - Definitions, section 1066A-G14 Payments taken to be ordinary income - Definitions (DSP (people under 21 who are not blind)), section 1067G-H20 Income test - Meaning of leave payment (YA), section 1067L-D16 Income test - Meaning of leave payment (Austudy), section 1068-G7AR Income test - Meaning of leave payment (WA, NSA (18 or over), SA (18 or over), PA and MAA (under Part 2.12B), section 1068A-E12 Ordinary income test - Definitions (PPS), 1068B-D18 Income test - Definitions (PPP), section 1228(2)(ca) Overpayments arising under other Acts and schemes, section 1234(1)(a) Deductions by consent from social security payment of person who is not a debtor
Taxation Administration Act 1953 schedule 1 section 16-155 Annual payment summary, schedule 1 section 16-160 Part year payment summary, schedule 1 section 18-65 Refund of withheld amounts by the payer to the recipient, schedule 1 section 18-70 Refund of withheld amounts by the Commissioner to the recipient, schedule 1 section 355-65 Exception-disclosure for other government purposes
Veterans' Entitlements Act 1986 section 205 Recovery of overpayments
PPLAct section 69 Deductions relating to child support
Paid Parental Leave Rules 2010
Policy reference: PPL Guide 4.3.4 Methods of Debt Recovery
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Last reviewed: 1 July 2011
