legal issues


Budget Review 2009-10 Index

Budget 2009 10: Welfare payments

Paid parental leave

Dale Daniels

A scheme of paid parental leave (PPL) was announced in the Budget. It will begin on 1 January 2011. The scheme to be introduced is essentially the same as the model developed by the Productivity Commission after the Rudd Government commissioned them to inquire into the form a PPL scheme should take in 2008.[1]

The changes made to the Productivity Commission model are:

  • primary carers who earn more than $150 000 in the full financial year prior to the birth will not be eligible
  • two weeks parental leave for the partner of the primary carer was not included in the scheme announced in the Budget but will be reconsidered in a review of the scheme in 2013and
  • employers will not be required to pay superannuation guarantee contributions while employees are receiving PPL. This and related superannuation issues will be re-examined in the 2013 review of the scheme.

A booklet setting out the scheme details is available on the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) website.[2]

The introduction of PPL in Australia has been delayed over the last fifteen years by the difficulties associated with designing a scheme that works in the Australian setting. Unlike most OECD countries, Australia does not have a social insurance based welfare system that requires contributions from workers towards a range of benefits provided. Without these contributions from people in employment it has been difficult, on equity grounds, to justify setting up a scheme that basically pays benefits to new mothers in employment, but not to other new mothers.

As a substitute for PPL the Keating Government introduced a means tested lump sum Maternity Allowance in 1996. However, pressure for PPL continued and the Howard Government tried another substitute for PPL—the First Child Tax Offset or Baby Bonus introduced for births after 1 July 2001. It was designed as a refund of tax paid by new mothers in the year before the birth of their first child. This tax refund feature was used to justify the payment of up to $2500 per annum for up to five years to mothers in employment. Mothers with no income could get a minimum payment of $500 per annum for up to five years.

This Baby Bonus proved unsustainable due to an overly complex design and the community’s inability to accept the proposition that new mothers with jobs and higher incomes deserved more assistance than mothers not in the workforce. In response, the Howard Government settled in the end for an enhanced Maternity Allowance. It was a simple, larger, un-means tested, lump sum payment called Maternity Payment (later renamed Baby Bonus). The designers of the PPL scheme announced in the Budget appear to have tried to avoid this equity issue by ensuring that stay at home mothers receive only a bit less than PPL mothers. How successful they have been, is yet to be seen.



[1].    Productivity Commission, Paid parental leave: support for parents with newborn children, Productivity Commission Inquiry Report, no. 47, Canberra, 28 February 2009, viewed 19 May 2009, http://www.pc.gov.au/projects/inquiry/parentalsupport/report

[2].    Department of Family, Housing, Community Services and Indigenous Affairs (FAHCSIA), Australia’s paid parental leave scheme, FAHCSIA, Canberra, 2009, viewed 19 May 2009,
http://www.fahcsia.gov.au/about/publicationsarticles/corp/
BudgetPAES/budget09_10/parental_leave/Pages/AustraliasPaidParentalLeaveScheme.aspx

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