Substantial changes to the Paid Parental Leave Scheme (PPL Scheme) will take effect from 1 July 2023.

Summary

Current Entitlements

Currently, under the Paid Parental Leave Act 2010 (Cth) (PPL Act), the PPL Scheme funds, at the rate of the National Minimum Wage:

• up to 18 weeks of Paid Parental Leave (PPL) usually paid to the birth mother of a newborn child or to the primary carer of a recently adopted child, comprising:

1. an initial 12-week period that must be taken as a continuous fixed block during the 12 months following the birth or adoption; and
2. a six-week flexible period that can be taken within two years of the birth or adoption in the way that works best for the birth mother or primary carer;

and

• up to two weeks of Dad and Partner Pay (DAPP), which is normally paid to the biological father of the child, the partner of the birth mother, or an adoptive parent, and must be taken as a continuous two-week block.

The Fair Work Act 2009 (Cth) (Fair Work Act) makes provision for unpaid parental leave for eligible employees.

Changes to the PPL Scheme from 1 July 2023

Under changes made to the PPL Act by the Paid Parental Leave Amendment (Improvements for Families and Gender Equality) Act 2022 (Cth) (Amending Act), where a child is born or adopted on or after 1 July 2023:

• an entitlement to 20 weeks’ leave that can be taken flexibly in its entirety within two years of the child’s birth or adoption will replace the current payment of 18 weeks to the primary carer and the two weeks’ DAPP
• neither parent in a couple may take more than 18 weeks’ leave (and each parent must therefore take at least two weeks of PPL)
• a new $350,000 family income limit may apply where the individual income test is not met
• expanded eligibility provisions will allow an eligible father or partner to receive PPL regardless of whether the birth parent or primary carer of an adopted child meets the income test, residency requirements or is serving a newly arrived resident’s waiting period.

The Government intends to progressively increase the PPL Scheme to 26 weeks of paid leave through a second tranche of changes to the PPL Scheme that will require separate legislation.

Changed Rules Concerning Unpaid Parental Leave from 6 June 2023

From 6 June 2023, new rules apply to employers who intend to reject an application from an employee to extend their unpaid parental leave beyond 12 months. Employees will also be able to appeal to the Fair Work Commission if they are unhappy with the outcome of their request.

The Key Changes to the PPL Scheme in More Detail

Making all PPL Weeks Flexible

While the amended PPL Scheme allows the leave to be taken flexibly, there is maximum period of flexible PPL days that can be taken for a claimant who is partnered at the time that they make their claim. A partnered claimant will not be eligible for PPL if the claim is for more than 90 flexible PPL days (roughly 12 weeks) for the child. This reserves 10 flexible PPL days (roughly two weeks) for another claimant, generally expected to be their partner.

As with the current dad and partner pay (DAPP) and current PPL arrangements, parents can only take two weeks of the new flexible PPL concurrently.

This change is quite complex and will require monitoring of the relevant government websites (for example, Services Australia) for more information about how this will work in practice and how to manage a claim for flexible PPL.

New Who Can Claim Rules

People who can currently 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 PPL Rules may also allow PPL claims by other individuals in exceptional circumstances.

The Amending Act 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 PPL in their own right (rather than as secondary claimants).

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

New $350,000 Family Income Limit

The Amending Act 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 PPL for the birth mother/primary carer 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, where there are families on identical incomes, when a family includes a mother who earns a higher income than the current income test, they cannot claim PPL as the birth mother or primary carer, regardless of what their partner earns. This is compared to a family that includes a mother who earns below the income threshold and who can claim PPL, even if their partner is a high income earner.

Using a family income test would exclude a mother who would otherwise be eligible but whose partner’s income puts them above the family threshold. The changes in the Amending Act 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 Amending Act is that a single parent who fails the individual income test will be assessed against the new family income limit.

Source and Further Information:

The Department of Parliamentary Services’ Bills Digest No. 55 2022-23 provides a more detailed overview of the purpose of the Amending Act and the key changes to the PPL Scheme, together with information from the Explanatory Memorandum.

These changes are very complex and require further monitoring of the relevant government websites up to and beyond 1 July 2023 to further understand how the new PPL Scheme will operate in practice for employers and employees.

Strengthening the Right to Request an Extension of Unpaid Parental Leave from June 2023

The National Employment Standards in the Fair Work Act provide eligible employees with an entitlement to unpaid parental leave. An employee taking 12 months unpaid parental leave has the right to request an extension for a further 12 months leave from their employer, unless their partner has already taken 12 months of leave.

Currently, the Fair Work Act requires an employer to respond to a request for an extension of unpaid parental leave by providing a written response within 21 days. If the employer is intending to refuse the request, they must provide an opportunity for the employee to discuss their request and then detail the reasons for the refusal in writing. The request can only be rejected on “reasonable business grounds”, however, there is no further guidance on what that means. If an employee is unhappy with the outcome of their request, they currently have very little recourse to take the matter further.

From 6 June 2023, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) will amend the Fair Work Act to require an employer to consider and inform the employee in writing if there is any other period of extension to which they would be willing to agree.

The amendments also provide guidance on what constitutes “reasonable business grounds” for refusing a request by listing examples, such as that the extension would be too costly for the employer, or that it would be impractical to change the working arrangements of others to accommodate the employee’s request. The written reasons for refusing a request must include the particular business grounds that apply to the employee’s request.

The amendments also provide increased access to dispute resolution for employees through the Fair Work Commission if they cannot resolve their dispute about an extension of unpaid parental leave directly with their employer.

Further information: the Department of Employment and Workplace Relations fact sheet Unpaid parental leave.