1.1
On 1 December 2022, the Senate referred the provisions of the Paid Parental Leave Amendment (Improvements for Families and Gender Equality) Bill 2022 (the bill) to the Senate Community Affairs Legislation Committee (the committee) for inquiry and report by 3 March 2023.
Structure of the report
1.2
This report contains two chapters. This chapter sets out:
background information relating to Australia’s Paid Parental Leave scheme and current policy settings;
an overview of the bill’s key provisions; and
general information outlining the conduct of the inquiry and other committees’ consideration of the bill.
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Chapter 2 sets out the views on the bill and concludes with the committee’s view and recommendation.
Purpose of the bill
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According to the explanatory memorandum, the bill amends the Paid Parental Leave Act 2010 (the Act) to make the payment more accessible, flexible and gender neutral.
1.5
In her second reading speech, the Minister for Social Services, the Hon Amanda Rishworth MP (the Minister) stated that the bill:
… gives more families access to the government payments, provides parents more flexibility in how they take leave and encourages them to share care to support gender equality.
Not only will [the] changes help families better balance work and care; they will also support participation and productivity over the longer term, providing a dividend for the Australian economy.
1.7
The bill outlines new, additional objectives for Australia’s Paid Parental Leave scheme, including:
(c)To provide financial support to parents caring for their children, in order to:
(i)
allow those parents to take time of work to care for their child after the child’s birth or adoption;
(ii)
enhance the health and development of birth mothers and children;
(iii)
encourage women to continue to participate in the workforce;
(iv)
provide those parents with flexibility to balance work and family life;
(v)
increase the time that fathers and partners take off work around the time of birth or adoption;
(vi)
create further opportunities for fathers and partners to bond with their child; and
(vii)
allow fathers and partners to take a greater share of caring responsibilities and to support mothers and partners from the beginning.
Background – Overview of the Paid Parental Leave scheme
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The Act establishes Australia’s national Paid Parental Leave scheme (the scheme) and sets out how it operates, as well as eligibility requirements.
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The objectives of the scheme are to:
signal that taking time out of the paid workforce to care for a child is part of the usual course of life and work for both parents; and
promote equality between men and women and balance between work and family life.
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The scheme provides eligible working parents with government funded pay, at the rate of the national minimum wage (presently $812.45 per week before tax), when they take time off work to care for a newborn or recently adopted child.
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The scheme covers full-time, part-time, casual, seasonal, contract and self‑employed workers and comprises two payments:
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In 2021–22, $2.645 billion in payments were made under the scheme, where:
178 778 individuals received Parental Leave Pay; and
97 863 received Dad and Partner Pay.
Parental Leave Pay
1.13
Presently, Parental Leave Pay provides up to 18 weeks of pay to eligible primary carers (usually birth mothers), and comprises two components:
a fixed paid parental leave period of up to 12 weeks (PPL period); and
six weeks of flexible paid parental leave (flexible PPL).
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The fixed PPL period must be taken in one continuous block, with no breaks in eligibility within the 12 months from the child’s date of birth or adoption.
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Flexible PPL can be taken any time after the PPL period, and within two years of the birth or adoption, on days the primary carer is not working. Flexible PPL can also be taken in multiple blocks, as small as a day at a time and may include periods of work in between.
1.16
A primary claimant is able to transfer all or part of the PPL period to their partner or the father of the child (providing they are also eligible) to use on days they have primary care of the child. An eligible primary claimant may also give permission for an eligible father or partner to claim some or all of the flexible PPL days.
1.17
In cases of adoption, Parental Leave Pay can be received for a child that is under 16 years of age on the day of placement. A claim must be submitted within 12 months of the placement and the entitlement can be received within two years of the date of placement. Parental Leave Pay cannot be received for a child that has come into a person’s care under a fostering arrangement, even if the child is eventually adopted by the person.
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Government-funded Parental Leave Pay is usually delivered through employers to long-term employees in their usual pay cycle. Parents who do not receive Parental Leave Pay from their employer or who do not have an employer, receive payments directly from Services Australia.
1.19
Claimants of Parental Leave Pay can receive the government-funded payment before, after or at the same time as employer provided leave.
Eligibility requirements
1.20
To be eligible for Parental Leave Pay, a person needs to be the primary carer of a child and meet the income test, work test, residency requirements and must not be serving a newly arrived residents waiting period (NARWP) without an exemption. Furthermore, the claimant must meet an income test, work test and residency test.
The income test
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Under existing settings, the claimant must have an individual adjustable taxable income of $156 647 or less in the 2021–22 financial year to be eligible for Parental Leave Pay.
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In establishing whether a person meets the income test, Services Australia assesses the claimant’s income from the financial year before either the date of birth or adoption; or the date the person lodges their claim (which ever date is earlier).
The work test
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Current settings provide that to be eligible for Parental Leave Pay, the primary claimant must have performed qualifying work for:
10 of the 13 months before the birth or adoption of their child; and
a minimum of 330 hours (around one day a week) in that 10-month period.
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Further, to be eligible for a PPL period, a person must not have returned to work from the date of birth or adoption, until the end of their PPL period.
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To be eligible for flexible PPL, a person must not be working on that day.
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On 4 September 2021, an exception to the work test was introduced to provide for special circumstances including domestic violence, natural disaster or severe medical condition. Other work test exceptions are also available, for example if claimants have a pregnancy related complication or illness, or if their work involves hazards that may pose a risk to the pregnancy. There are also provisions that extend the work test period for parent’s whose work was affected by the COVID-19 pandemic.
The residency test
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Claimants must also meet residency rules. When their child is born or adopted, they must be living in Australia, and have one of the following:
An Australian citizenship
A certain temporary visa, for example a partner provisional or temporary protection visa.
1.28
Newly arrived residents may have to wait for two years before accessing Parental Leave Pay, with some exemptions available.
Dad and Partner Pay
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Under current settings, Dad and Partner Pay provides up to two weeks of pay to eligible working fathers or partners at the rate of the national minimum wage (presently $812.45 per week before tax). For the purposes of this payment, a father or partner is defined as:
a child’s biological father;
a partner of the birth parent;
a partner of the adoptive parent; or
a person caring for a child born of a surrogacy arrangement.
1.30
To receive the payment, fathers or partners must:
be caring for the child on each day of the period they receive Dad and Partner Pay;
not be working or taking paid leave during the Dad and Partner Pay period;
have met the income test (as per the Parental Leave Pay requirement);
have met the work test (as per the Parental Leave Pay requirement); and
have met the residency rules and NARWP requirements.
1.31
Dad and Partner Pay claimants can receive their government funded payment before or after, but not at the same time as their employer provided leave. The role of employers in Dad and Partner Pay is to provide unpaid leave so that their eligible employees can access the payment.
Claim hierarchy
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Currently, a primary claimant for Parental Leave Pay must be the birth parent, an adoptive parent or others in exceptional circumstances, such as if the birth parent is incapable of caring for their child.
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A father or partner can claim Parental Leave Pay as a secondary payment however in order for a secondary claimant to receive Parental Leave Pay, both the primary and secondary claimants must satisfy income, work and residency tests (and NARWP requirements if applicable).
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Current policy also establishes that if a birth parent does not satisfy the work and residency requirements or is serving a NARWP without an exemption, a father or partner cannot be eligible for Parental Leave Pay.
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Similarly, if a birth parent has an income over the relevant income limit, a father or partner cannot receive Parental Leave Pay, even if their income is below the income limit. Conversely, a birth parent with an income below the income threshold can receive Parental Leave Pay, regardless of their partner’s income.
Employer-provided paid parental leave
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Both Parental Leave Pay and Dad and Partner Pay can be complemented by employer parental leave schemes, for example through company policy or enterprise agreements.
1.37
While superannuation is not included the Paid Parental Leave scheme, legislation does not prevent individuals from making voluntary superannuation contributions, or employers from choosing to pay superannuation on Parental Leave Pay or Dad and Partner Pay.
1.38
Around 81 per cent of employers offering paid parental leave also pay superannuation for parents while on paid leave, and 7 per cent pay superannuation on both employer-funded and government funded parental leave.
Provisions of the bill
1.39
The bill is comprised of three schedules:
Schedule 1 – Main amendments
Schedule 2 – Consequential amendments
Schedule 3 – Application, savings and transitional amendments.
1.40
Key provisions of each schedule are outlined in the sections below.
Schedule 1 – Main amendments
Extending Parental Leave Pay and reserved ‘use it or lose it’ period
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Amendments in the bill will extend Parental Leave Pay from 18 weeks to 20 weeks from 1 July 2023, and reserve two weeks on a ‘use it or lose it’ basis for each claimant.
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This extension is a result of combining the current maximum of 18 weeks of Parental Leave Pay, with the current two weeks of Dad and Partner Pay. Dad and Partner Pay will be abolished.
1.43
Claimants who are partnered when they first claim Parental Leave Pay will each be able to receive up to 18 weeks of Parental Leave Pay, with a maximum of 20 weeks between them. Claimants who are single at the time of their claim will be able to access the full 20 weeks of pay.
Gender neutral claiming
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The Act currently distinguishes between primary, secondary and tertiary claims and claimants. The amendments will remove this distinction, as well as the requirement that the primary claimants of Parental Leave Pay must be the birth parent.
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This change means both parents will be able to claim Parental Leave Pay in their own right, rather than limiting fathers and partners to claim only as a secondary claimant following a claim by the birth parent. It will also allow families to decide who will claim first and how they will share the entitlement.
1.46
To reflect these changes, the terms ‘primary claim’, ‘primary claimant’ ‘secondary claim’ and ‘secondary claimant’ will be consolidated and replaced by the terms ‘PPL claim’ and ‘PPL claimant’.
1.47
Further, the terms ‘tertiary claim’ and ‘tertiary claimant’ will be replaced by ‘special PPL claim’ and ‘special PPL claimant’.
1.48
Under the amendments, a PPL claim can be made by the following people:
the child’s birth parent;
an adoptive parent of the child;
a person who is a parent of the child but is not the birth parent;
the partner of the child’s birth parent;
the partner of an adoptive parent of the child;
the partner of a person who is a parent of the child but is not the birth parent; and
a person who makes a PPL claim in exceptional circumstances (as described in sections 26 and 27 of the Paid Parental Leave Rules 2021).
1.49
The currently enacted permission requirements applying to claims other than by the birth parent will be revised accordingly, including to distinguish between permission to make a claim and permission to claim days.
Increasing flexibility
1.50
To allow claimants to use their parental leave entitlements in a way that works best for them, paid parental leave will consist of only flexible PPL days under new amendments. Existing provisions relating to the fixed 12-week PPL period (see paragraph 1.14) will be repealed.
1.51
This means that parents can take their paid parental leave in blocks as small as a day at a time, with periods of work in between, from the period beginning on the child’s date of birth or adoption, until the day before the child’s second birthday or second anniversary of care.
1.52
While the Act does not currently allow days of Parental Leave Pay for the same child to be taken concurrently, amendments in the bill will allow eligible claimants to take a maximum of two weeks (10 payable days) of Parental Leave Pay concurrently.
1.53
The explanatory memorandum to the bill explains the following in relation to concurrency:
This will assist parents to share caring responsibilities and provide an opportunity for dads and partners to also provide care for birth parents to support their health.
Concurrency will be limited to ensure that parents are encouraged to return to work. It will also prompt fathers and partners to take on independent care of the child, which international studies have demonstrated develops patterns of care that persist throughout the child’s life.
Eligibility changes
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The bill proposes changes to the scheme’s current income and work tests.
Income test
1.55
Under current eligibility settings, a claimant’s adjusted taxable income for the reference income year is assessed using an individual income test. Currently, the income limit is $156 647 or less (for 2021–22).
1.56
The proposed amendments will introduce a new, $350 000 family income test for persons who fail the individual income test, regardless of whether or not they are partnered at the time of their first effective claim.
1.57
The family income limit of $350 000 will be indexed annually from 1 July 2024, taking into account the Consumer Price Index. The individual income limit will continue to be indexed annually on 1 July.
1.58
The explanatory memorandum to the bill notes that this change ensures that persons in comparable circumstances are treated equitably when assessing eligibility for Parental Leave Pay and provides a practical example:
… both single parents and partnered parents who do not meet the individual income test, but do meet the family income test, can be eligible for Parental Leave Pay. Similarly, a person can be eligible for Parental Leave Pay if they meet the individual income test but do not meet the family income test when their partner’s income is included in the assessment.
Work test
1.59
Current settings establish a different work test period for ‘primary’ and ‘secondary’ claimants. Changes in the bill align the work test period, so that both PPL claimants will have the same work test period – generally, 392 days immediately before the child’s date of birth or adoption.
1.60
The amendments also remove the existing requirement that a person must not have returned to work in order to remain eligible for Parental Leave Pay.
Employer determinations
1.61
Employer determinations (where a person’s employer pays them their Parental Leave Pay) will remain essentially unchanged, requiring the employer to pay only where the employee has a continuous period of flexible PPL days. The concept of continuous flexible period is modified, because under the proposed changes, it would no longer include a sequence of days within a fixed PPL period.
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The explanatory memorandum to the bill explains:
These changes are designed to minimise the administrative burden on employers by providing more certainty in the number of days they are liable to pay Parental Leave Pay and by keeping the employer determination arrangements as consistent with current arrangements as possible.
1.63
As per existing settings, where a person’s employer does not pay their Parental Leave Pay, it will be paid directly by Services Australia.
Schedule 2 – Consequential amendments
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This schedule makes amendments to various Acts to reflect that the Paid Parental Leave scheme will consist only of flexible PPL days, and that Dad and Partner Pay will be abolished.
1.65
Consequential amendments are made to the following Acts:
A New Tax System (Family Assistance) Act 1999
A New Tax System (Family Assistance) (Administration) Act 1999;
Data Matching Program (Assistance and Tax) Act 1990;
Income Tax Assessment Act 1997;
Social Security Act 1991;
Taxation Administration Act 1953; and the
Veterans’ Entitlements Act 1986.
Schedule 3 – Application, savings and transitional amendments
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Schedule 3 contains savings provisions in relation to the amendments and provides for their application and transition to the changed scheme.
1.67
Item 1 provides definitions, establishing 26 March 2023 as the ‘commencement day’, and the period from 26 March 2023 to 20 June 2023 as the ‘transition period’. This is in line with section 60 of the current Act, which establishes that a person may make a claim for Parental Leave Pay 97 days before the child’s expected date of birth.
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Items 2, 3 and 4 set out the continuing application of other Acts, provisions relating to qualifying work, and provides for the application of amendments to claims made under the following scenarios:
Within the transition period; and
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Item 5 outlines how the reforms would apply to adopted children, as well as claims made in exceptional circumstances.
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Item 6 provides for the power to request information in relation to claims.
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Item 7 outlines where the Paid Parental Leave Rules may deal with transitional arrangements relating to the amendments made by the bill, in recognition that unforeseeable issues may arise during the transition period.
Financial impact
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The explanatory memorandum to the bill states that Schedule 1 of the bill implements part of the 2022–23 Budget Measure (Boosting Parental Leave to Enhance Economic Security, Support and Flexibility for Australia’s Families) which will have a financial impact of $531.6 million over the forward estimates. This includes impacts for Services Australia in relation to the cost of information and communications technology development and implementation.
1.73
The submission provided by the Department of Social Services notes that the proposed measures will cost $619.3 million per year on an ongoing basis.
Compatibility with human rights
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The statement of compatibility with human rights states that the bill engages the following human rights:
the right to social security;
the right to protection and assistance for families;
the right to maternity leave; and
the right to equal treatment.
1.75
The statement notes that the bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Humans Rights (Parliamentary Scrutiny) Act 2011. It concludes that the bill is compatible with human rights because it does not limit, but rather enhances access to social security, maternity leave, and assistance for families.
Consideration by other committees
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The Parliamentary Joint Committee on Human Rights and the Senate Standing Committee for the Scrutiny of Bills separately made no comment on the bill.
Conduct of the inquiry
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Details of the inquiry were made available on the committee’s website. The committee also contacted a number of organisations and individuals to invite written submissions by 23 January 2023.
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The committee received 26 submissions, as listed at Appendix 1.
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The committee held a public hearing in Canberra on 20 February 2023. Witnesses are listed at Appendix 2.
Acknowledgement
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The committee thanks the organisations and individuals that made submissions for their interest and contributions to the inquiry.