Key points

• This Bill includes measures announced in the Morrison Coalition Government’s March 2022 budget along with additional measures announced in the Albanese Labor Government’s October 2022 Budget.
• The Bill introduces the first tranche of changes the Government announced in the Budget. This includes abolishing Dad and Partner Pay (DAPP) as a separate payment, making all paid parental leave weeks flexible, introducing gender-neutral claim rules, and introducing a $350,000 family income limit.
• Progressively increasing the Paid Parental Leave scheme to 26 weeks of paid leave will be part of the second tranche of changes and will require separate legislation.

Introductory Info

Date introduced: 30 November 2022
House: House of Representatives
Portfolio: Social Services
Commencement: 26 March 2023

Purpose of the Bill

The purpose of the Paid Parental Leave Amendment (Improvements for Families and Gender Equality) Bill 2022 (the Bill) is to amend the Paid Parental Leave Act 2010 (PPL Act) to:

• Combine the Parental Leave Pay (18 weeks) and Dad and Partner Pay (2 weeks) schemes, creating a single parental leave payment available for 20 weeks with two weeks reserved on a ‘use it or lose it’ basis for each claimant.
• Remove the categories of ‘primary’, ‘secondary’ and ‘tertiary’ claimant and the requirement that the primary claimant of Parental Leave Pay must be the birth parent.
• Allow claimants to take the payment flexibly within two years of the birth or adoption.
• Introduce a $350,000 family income limit under which families can be assessed if they do not meet the individual income test.
• Expand eligibility to allow an eligible father or partner to receive parental leave pay regardless of whether the birth parent meets the income test, residency requirements or is serving a newly arrived resident’s waiting period.

The Bill also makes consequential amendments to a number of other Commonwealth statutes.

Structure of the Bill

The Bill comprises three Schedules:

• Schedule 1 contains the main amendments to the PPL Act
• Schedule 2 makes consequential amendments to the A New Tax System (Family Assistance) Act 1999, the A New Tax System (Family Assistance) (Administration) Act 1999, the Data-matching Program (Assistance and Tax) Act 1990, the Fair Work Act 2009, the Income Tax Assessment Act 1997, the Social Security Act 1991, the Taxation Administration Act 1953 and the Veterans’ Entitlements Act 1986
• Schedule 3 contains application and savings provisions.

Background

On 30 November 2022 the Minister for Social Services, Amanda Rishworth, announced that Government had introduced a Bill which would contain the first tranche of changes to the Paid Parental Leave (PPL) scheme. The Government had announced the proposed changes in the Budget. She said:

the Bill will give more families access to the Government payment, provides parents greater flexibility in how they take leave and encourages them to share care to support gender equality.

Ms Rishworth also stated that the Bill needs to pass the Parliament by March 2023 so parents who are expecting to give birth or to adopt on or after 1 July 2023 can pre-claim payments as soon as they are eligible.

The second tranche of changes will progressively increase the Paid Parental Leave scheme from July 2024, until it reaches 26 weeks in 2026. This change will require further legislation.

Current policy settings

The current PPL scheme includes two separate payments to parents taking leave from work to care for a newly born or adopted child—Parental Leave Pay (PLP) and Dad and Partner Pay (DAPP).

Payments for new parents while on leave

The PPL scheme provides payments at the equivalent of the minimum wage.

Despite its name, the scheme does not provide an entitlement to parental leave. As Erin McCarthy, Elise Jenkin and Andrew Stewart explain in their 2012 guide to parental leave, the PPL Act:

… does not in fact confer any entitlement to parental leave. Instead, it permits eligible carers to apply for what is, in effect, a social security payment that is spread over up to 18 weeks, so long as the carer does not return to work during that period.[1]

Workers’ entitlements to unpaid parental leave are part of the Fair Work system created by the Fair Work Act 2009. Under the Fair Work Act, parents (on a gender-neutral basis) may access up to 12 months of continuous unpaid parental leave,[2] and may request an additional 12 months of leave.[3] The Fair Work system is a national workplace relations system that covers most Australian workplaces.[4]

Entitlements to a payment while on parental leave are covered by the PPL Act. The Act is the responsibility of the Minister for Social Services and payments are made by Services Australia.

The PPL scheme is designed to mimic the paid leave entitlements employers provide to permanent employees under standard employment contracts. According to the Productivity Commission, the rationale for this ‘is to signal that paid parental leave should be perceived as a normal feature of employment arrangements’.[5]

Parents do not need parental leave entitlements under the Fair Work Act to access PLP and DAPP. New parents who are self-employed or have worked as casuals or seasonal workers can also access the PPL scheme if they have the required work history.

Parental Leave Pay (PLP)

Under current arrangements, PLP is normally paid to the birth mother of a newborn child or to the primary carer of a recently adopted child. It can be paid for a total of 18 weeks and is paid at the rate of the National Minimum Wage (currently $812.60 per week).

Two components

Claimants’ 18 weeks of PLP entitlements are divided into two components. The first is for a period of 12 weeks where payments must be taken as a continuous block. This is called the PPL period. Claimants must take payment for these weeks during the first 12 months of the birth or adoption. According to the Department of Social Service’s Paid Parental Leave Guide:

The initial 12 week PPL period is intended to support eligible working parents, usually the mother, to take time off work after a birth or adoption to spend time with their child, to support rest and recuperation from birth and to support health benefits for the child.

The second component is 30 days of flexible PPL. (Thirty days is equal to six five-day working weeks. Added to the 12-week PPL period, this is roughly equivalent to 18 weeks of PPL). Flexible PPL days do not have to be taken in a block. One way in which claimants can use these PPL days is to supplement their income if they return to work part time.

Claimants must use their flexible PPL days before their child’s second birthday or adoption anniversary.

How partners can share Parental Leave Pay

It is possible for parents and partners to share PPL. Under the current legislation, there are three categories of claims—primary, secondary, and tertiary. In most cases the person making a primary claim is the birth mother. A father or partner can only become the primary claimant in exceptional circumstances.

If the primary claimant returns to work (or otherwise ceases to be the child’s primary carer) before they have used their full PPL entitlement, they may be able to transfer the unused entitlement to their partner if their partner becomes the child’s primary carer. The partner then becomes the secondary claimant.

The legislation also deals with more complex situations where the other legal parent of the child is not the birth parent’s partner. In these cases it is possible for the other legal parent or their partner to become a secondary claimant. However, more distant relatives such as aunts or grandmothers can only become secondary claimants in exceptional circumstances.

Tertiary claims can be made when a secondary claimant is no longer the child’s primary carer. A tertiary claim can be made by a primary claimant who resumes care of the child or it could be made by another person where neither the primary nor secondary claimant is able to care for the child.

Because secondary and tertiary claims depend on a prior primary claim, fathers and partners are normally unable to claim PPL if the birth mother is ineligible. Examples might be where the birth mother has failed to meet the income test.

Income test

The most recent DSS Annual Report lists PPL as a welfare payment (p. 46). Like most welfare-type payments, PPL has an income test. In her Second Reading Speech for the Paid Parental Leave Bill 2010, the Minister responsible for the scheme, Jenny Macklin, argued a means test was ‘consistent with the principle of targeting government support to those most in need’.

However, unlike the income test for most welfare payments, the PLP income test is set at a high level (currently an adjusted taxable income of $156,647 for the 2021–22 financial year) and only applies to the income of the individual claimant. A claimant’s eligibility is not affected by the income of their partner.

The income test applies to the claimant’s income for the financial year before the birth, adoption or claim. Any income the claimant receives while they are receiving PLP does not affect their entitlement.

Another difference is that it is a ‘sudden death’ rather than a tapered income test. A claimant’s PLP entitlement does not reduce as their income rises. Instead, if a claimant’s income is above the threshold they receive no payment.

Work and residency tests

PLP claimants must also satisfy a work test and a residency test.

To meet the work test a claimant must have performed 330 hours of qualifying work over a period of at least 295 days (around 10 months) within their work test period. The work test period is the 392 day period (around 13 months) prior to the expected or actual date of birth or placement of the child for adoption.

Under the residence test, a claimant must be living in Australia when their child is born or adopted and they must have Australian citizenship, a permanent visa, or certain other visa categories.

There is also a newly arrived residents waiting period (NARWP) that means migrants may have to wait 2 years before they are eligible for PLP.

Dad and Partner Pay (DAPP)

DAPP is normally paid to the biological father of the child, the partner of the birth mother, or an adoptive parent. DAPP can be paid for 2 weeks (10 week days). It must be taken as a continuous 2 week block.

Like PLP it is paid at the rate of the National Minimum Wage (currently $812.60 per week). DAPP also shares the same income, work and residency tests as PLP.

Claimants cannot receive DAPP at the same time as they are claiming paid leave. PLP and DAPP cannot be paid to the same person at the same time for the same child, but can be paid at the same time for different children.

Announcements from the March 2022 and October 2022 Budgets

The Bill includes measures proposed in the Coalition Government’s March 2022 Budget with additional measures announced in the new Labor Government’s October 2022 Budget.

The Bill does not include provisions which would commence the October Budget’s announcement about a phased increase in the length of PLP to 26 weeks by 1 July 2026.

Changes proposed in the Coalition’s March 2022 Budget

As part of the March 2022 Budget’s Women’s Economic Security Package, the Morrison Coalition Government proposed three changes:

• Combine the Parental Leave Pay (18 weeks) and Dad and Partner Pay (2 weeks) schemes, creating a single parental leave payment available for 20 weeks (p. 169).
• Allow claimants to take the payment flexibly within two years of the birth or adoption (p. 169).
• Introduce a $350,000 family income limit under which families can be assessed if they do not meet the individual income test (p. 18).

Changes proposed in Labor’s October 2022 Budget

The Labor Government’s October 2022 Budget retains the measures announced in March with three additional changes:

• Two weeks of the single Parental Leave Payment are reserved on a ‘use it or lose it’ basis for each claimant. For members of a couple this means that each parent can receive a maximum of 18 weeks. Single parents can receive the entire 20 weeks.
• Remove the categories of ‘primary’, ‘secondary’ and ‘tertiary’ claimant and the requirement that the primary claimant of Parental Leave Pay must be the birth parent.
• Expand eligibility to allow an eligible father or partner to receive parental leave pay regardless of whether the birth parent meets the income test, residency requirements or is serving a newly arrived resident’s waiting period (p. 177).

The October 2022 Budget also includes a measure to increase the number of weeks from 20 to 26 by July 2026. According to the budget proposal the Government would add two weeks each year. This measure is not included in the Bill.

Committee consideration

Senate Standing Committees on Community Affairs

The Bill has been referred to the Senate Standing Committees on Community Affairs (Community Affairs Committee) for inquiry and report by 3 March 2023.[6] At the time of writing this Bills Digest, the Community Affairs Committee had published 26 submissions from stakeholders.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing this Bills Digest the Senate Standing Committee for the Scrutiny of Bills had not published any comments in relation to the Bill.

Policy position of non-government parties/independents

Australian Greens

In the lead-up to the 2023 Federal election, The Australian Greens called for:

• More equitable access to parental leave and flexible working arrangements will help families to share caring responsibilities more fairly
• 26 weeks leave for parents to share – six weeks for each parent to ‘use it or lose it’, and 14 weeks to share between them
• Leave paid at the carer’s wage (up to $100,000pa, pro rata)
• Superannuation paid on all parental leave
• Removing barriers for parents where a woman is the higher income earner to share care
• Flexible working arrangements to help parents to return to work and share caring responsibilities more fairly
• Free early education and childcare.

Independents

Commenting on the Albanese Labor Government’s October 2022 Budget measures, Zali Steggall, the independent member for Warringah, said:

While these measures are welcome, they won’t come into effect for another 8 months and paid parental leave changes won’t be fully implemented until 2026 – surely, we should be implementing these solutions sooner rather than later.

Financial implications

The Bill’s Explanatory Memorandum gives the cost of the ‘Boosting Parental Leave to Enhance Economic Security, Support and Flexibility for Australia’s Families’ measure in the October 2022‑23 Budget ($531.6 million over the forward estimates).[7] The Budget measure includes the estimated cost of expanding the scheme to 26 weeks by 1 July 2026. The expansion of the scheme to 26 weeks is not part of this Bill.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[8]

Parliamentary Joint Committee on Human Rights

As at the time of writing, the Parliamentary Joint Committee on Human Rights had not commented on the Bill.

Key issues

According to the Regulation Impact Statement (RIS) (commencing at page 36 of the Explanatory Memorandum to the Bill), the changes are aimed at:

• improving gender equality by supporting women’s workforce participation (p. 9)
• addressing the common assumption that the primary carer, usually the mother, is the lower income earner in a relationship (p. 10).

The RIS notes that one reason women earn less than men is because they are more likely to take time away from the labour force to care for children. According to the RIS this pattern reflects ‘cultural norms that reinforce the allocation of caring responsibilities in Australia. KPMG estimates that care and family duties account for 39 per cent of the gender pay gap’ (p. 9).

One way to pursue gender equality is to support women to participate in paid work more the way men do. Another approach is to persuade men to participate in caring more the way women do. Increasing caring participation by men would help enable increased labour force participation by women, so the two approaches are complimentary.

The Bill does not extend the scheme to 26 weeks

The October 2022–23 Budget included a measure to expand the Parental Leave Pay by two weeks a year until it reaches 26 weeks by July 2026. According to the budget papers, the first increase will come in 2024. This measure is not included in the Bill. In her second reading speech the Minister for Social Services, Amanda Rishworth said:

This is a significant reform, driven by our commitment to get the settings right to maximise women's economic equality. That is why we are introducing the reform in two stages—this bill, to take immediate steps to improve the scheme, but also to allow the Women's Economic Equality Taskforce to have a look at our expanded six weeks and look at how it best maximises women's economic participation.

Submitters to the Community Affairs Committee such as the Advancing Parent Leave Equality Network (APLEN) recommended the increase of PLP to 26 paid weeks should be implemented within 12 months.[9] Similarly, the Global Institute for Women’s Leadership at the Australian National University proposed that options for implementing an accelerated pathway to 26 weeks paid parental leave for low income earners before implementing the full increase to family income threshold should be considered.[10]

From an entitlement for working mothers to an entitlement for working parents

When the Human Rights and Equal Opportunity Commission (HREOC) looked at the issue of paid maternity and parental leave in 2002, it proposed 14 weeks of paid leave exclusively for the mother as ‘a basic right for women in paid work in Australia’ (p. 150). The rationale was to allow mothers time to recover from birth, ensure their own health and wellbeing, and establish breastfeeding.[11]

The current scheme maintains the idea that the right to payments lies with the birth mother (except in cases of adoption or exceptional circumstances). When the Government decided the scheme would be a parental leave rather than a maternity leave scheme they did this by giving the mother the ability to transfer unused payment weeks to the father or partner. This means the father or partner does not have an independent entitlement to a payment. If the birth mother is not eligible then there are no payment weeks to transfer.

This is the rationale behind the categories of primary, secondary, and tertiary claimants. Under the current system, the initial claim is made by the primary claimant (usually the birth mother). Once the primary claimant has established an entitlement to payment, it may be possible for them to transfer weeks or days of payment they have not used to a secondary claimant (usually the father or partner). In some circumstances unused weeks or days may be transferred from the secondary claimant to a tertiary claimant.

The Bill moves away from this approach by allowing fathers and partners to claim PLP in their own right. This is reflected in the updated objects of the PPL Act.[12]

Key provisions

Abolishing DAPP

The PPL scheme currently includes two separate payments—up to 18 weeks PLP and up to 2 weeks DAPP. In a 2019 article, journalist Annabel Crabb described PLP as ‘a national paid parental leave scheme for the primary caregiver’ and DAPP as ‘an ancillary mini-scheme for the other parent’. The Bill abolishes DAPP as a separate payment and allows fathers and partners to claim PLP in their own right. Item 177 in Schedule 1 to the Bill repeals Chapter 3A of the PPL Act which sets out the rules for payment of DAPP. The Bill also makes consequential amendments to provisions in the PPL Act to remove references to DAPP.

‘Use it or lose it’ requirement

The proposal in the March 2022-23 budget combined the existing 2 weeks of DAPP and 18 weeks of PLP into a single 20-week payment that could be shared between parents however they chose. This would have allowed one parent to take all 20 weeks of payment (p. 139).

The Bill modifies this proposal by adding a ‘use it or lose it’ requirement where neither parent in a couple can take more than 18 weeks of PLP. To claim the full 20 weeks each parent must take at least 2 weeks of PLP.

According to the most recent RIS, the change:

… signals that both parents should take time away from work to care for a child. This responds to the concerns of stakeholders and advocates, who raised concerns that the 2022-23 March Budget measure’s full flexibility would likely result in birth parents taking all 20 weeks available, to the detriment of men’s engagement in caring for children (p. 29).

While couple parents cannot claim more than 18 weeks of PLP each, single parents will be able to claim the full 20 weeks. The Bill increases single parents’ PLP entitlement by 2 weeks.

Making all PPL weeks flexible

Currently, there are two components of PLP, an initial 12 week PPL period (in section 31 of the PPL Act) that must be taken as a continuous block and a 6 week flexible PPL period (in section 31AA of the PPL Act). The Bill will replace this with a single period of flexible PPL.[13] This means parents will no longer lose weeks of PLP if both of them return to work before using all 12 weeks of PLP.

Early thinking on the design of an Australian maternity or parental leave scheme emphasised the benefits of a continuous period of care for the welfare of mothers and children. For example, HREOC’s 2002 report A time to value: proposal for a national paid maternity leave scheme proposed that 14 weeks of maternity leave pay should be taken as a continuous block (p. 191).

The Productivity Commission (PC) took a similar approach to parental leave pay. In its 2009 report: Paid Parental Leave: Support for with Newborn Children, the PC argued that the child should receive a continuous period of care:

While there may be benefits from allowing parents to stop and then subsequently recommence their parental leave care to meet the needs of their small business, to study, or to strengthen links to the workplace, this could run against the child welfare benefits of continuous exclusive parental care. Accordingly, the Commission proposes that (collectively) parents would have to take leave in one block … The requirement for continuity of care would not preclude one parent from taking time off from a caring role if the other parent (see below) then took up that role (pp. 2.42–2.43).

The PC also stressed the importance of time for the mother’s recovery after birth arguing: ‘On maternal recovery grounds, the length of absence from work should be no less than 12 weeks and potentially up to six months’ (p. 4.1).

Under the original PPL scheme, parents needed to take PLP in one continuous 18 week period. In its 2018 Women’s Economic Security Statement, the Morrison Coalition Government announced a more flexible system that allowed 6 weeks of PLP to be used flexibly within the first two years of birth or adoption. This change was legislated in the Paid Parental Leave Amendment (Flexibility Measures) Act 2020.

The Bill adds more flexibility by removing the distinction between the 18-week PPL period and 6 weeks of flexible PPL. It substitutes a single 20-week period of flexible PPL. Item 66 in Schedule 1 to the Bill repeals and replaces subsections 31AB(2)-(5) of the PPL Act. Proposed subsection 31AB(2) provides that a claimant is not eligible when the number of flexible PPL days for the child exceed certain maximum amounts.[14] The maximum amounts depend on whether or not the claimant is partnered at the time they make their first effective claim: proposed subsections 31AB(3) and (4).

However, there is an exception to this general rule. Under proposed subsection 31AB(5), a claimant who is partnered at the time they make their first effective claim will not be eligible for PLP if the claim is for more than 90 flexible PPL days for the child. This reserves 10 flexible PPL days for another claimant, generally expected to be their partner.

As with the current DAPP and PLP arrangements, parents can only take 2 weeks of the new flexible PLP concurrently.

The Explanatory Memorandum provides a detailed account of the changes (9–12).

Gender neutral claim rules

The Bill makes changes to allow fathers or partners to claim a payment without the birth parent having to make a successful claim first. Fathers or partners will be able to make a claim for PLP in their own right (rather than as secondary claimants). According to the RIS:

Introducing gender neutral claim rules, with parents able to nominate the primary claimant, aims to greatly improve the gender equality of the scheme and remove the signal that the duty to care for a child should fall on women (p. 29).

Being able to make a claim in their own right means fathers and partners who meet the eligibility criteria will be able to claim PLP in cases where the birth mother is ineligible due to the income or residency tests.

While able to claim PLP in their own right, fathers and partners will normally require the permission of the birth mother to make a claim (except in cases of adoption). According to the RIS:

This will prevent non-birth parents from using the majority of the payment without awareness or permission from the birth parent, which may be used to perpetrate financial abuse or coercive control (p. 15).

Items 26, 32 and 34 in Schedule 1 to the Bill amend section 6 of the PPL Act to repeal the definitions of primary claim; secondary claim and tertiary claim respectively. Instead, the Bill creates two categories of claimants—a PPL claimant being a person who has made an effective PPL claim for parental leave pay for a child[15] and a special PPL claimant being a person who has made an effective special PPL claim for parental leave pay for a child for which another person has made a PPL claim.[16]

People who can make a PPL claim include the child’s birth mother, an adoptive parent, the partner of an adoptive parent, the birth mother’s partner, a parent who is not the birth mother, and the partner of a parent who is not the birth parent. The Paid Parental Leave Rules may also allow PPL claims by other individuals in exceptional circumstances.[17]

Special PPL claims will deal with exceptional circumstances and take the place of secondary and tertiary claims.[18] The Explanatory Memorandum includes a detailed explanation of the new special PPL category (5, 14–22).

The Explanatory Memorandum includes a detailed description of how gender neutral claiming is incorporated into the PPL Act.

Introducing a $350,000 family income limit

The Bill introduces a $350,000 family income limit, under which families can be assessed if they do not meet the individual income test.

Under the current income test, an individual cannot receive PLP or DAPP if their adjusted taxable income is over $156,647 in the 2021–22 financial year. The income test applies only to the individual’s own income.

The current income test has been criticised as discriminatory because families on identical incomes can be treated less favourably when the mother is the higher income earner.[19] This issue was raised in 2009 before the scheme was implemented. At the time, Families Minister Jenny Macklin argued: ‘Paid parental leave is a workforce entitlement, so eligibility is connected with the individual worker.’

A 2016 petition to the House of Representatives raised the issue of discrimination against families where the woman is the main breadwinner and asked for the income test to be changed from the mother’s income to the family income.

Using a family income test would exclude mothers who would otherwise be eligible but whose partners’ incomes put them above the family threshold. This is why Jo Briskey, Executive Director of The Parenthood, argued that ‘to tie Paid Parental Leave eligibility to a man’s wage would fundamentally destroy the system as we know it.’

The changes in the Bill avoid this problem by only applying the family income limit if the claimant fails the individual income test.

One effect of the changes in the Bill is that a single parent who fails the individual income test will be assessed against the new family income limit.

The Bill makes a number of changes to Division 4 of Part 2–3 of the PPL Act to introduce the new income testing arrangements. The major change is item 102 which repeals and replaces section 37 so that there are three ways the income test can be satisfied:

• If the person’s income is not more than the individual PPL income limit: proposed subsection 37(1)
• If the person does not have a partner and their income is not more than the family PPL income limit: proposed subsection 37(2)
• If the person has a partner and the total of the person’s income and the partner’s income is not more than the family PPL income limit: proposed subsection 37(3).

Item 110 in Schedule 1 to the Bill inserts proposed subsection 41(2) which provides that the family PPL income limit of $350,000 applies on a day that is on or after 1 July 2023 but before 1 July 2024. Subsequent amounts will be subject to indexation.