Exemption for parental leave

PTA-012v2

This ruling replaces PTA-012 to take into account amendments to the parental leave exemption that took effect from 1 July 2019.

Because this exemption is not harmonised with other Australian jurisdictions, neither is this Revenue Ruling.

Preamble

Until 30 June 2019, section 53 of the Payroll Tax Act 2007 (the Act) exempted certain wages paid or payable to an employee on maternity leave or adoption leave from payroll tax. From 1 July 2019, this exemption has been extended to wages paid or payable in respect of parental leave to both primary caregivers and secondary caregivers.

The purpose of this Revenue Ruling is to explain the application of the exemption for parental leave pay and clarify elements of the exemption.

Ruling

The parental leave exemption from payroll tax:

• Applies to wages paid or payable by an employer to an employee in respect of leave for the employee's role as primary caregiver or secondary caregiver for a child.
• Applies to all types of wages paid or payable in respect of that leave other than fringe benefits.
• Applies in cases of a pregnancy or the birth or the adoption of a child.
• Does not apply to sick leave, recreation leave, annual leave or any similar leave.
• Is limited to a maximum of 14 weeks’ pay (or a pro-rata amount).
• Applies irrespective of whether the leave is taken before or after the birth or adoption.
• Applies to wages paid or payable on or after 1 July 2019.
• Must be supported by keeping relevant records.

Further information about the requirements of this exemption is set out below.

Payments made by an employer under the Commonwealth Government’s Paid Parental Leave (PPL) scheme are different to wages paid or payable by an employer in relation to parental leave provided by the employer. PPL payments are not subject to payroll tax – see Revenue Ruling PTA-037. 

Primary caregiver for a child

The primary caregiver is the person who is pregnant with the child or the parent of any gender who has the principal role of providing care and attention to the child.

There can only be one primary caregiver for a child at any one time.

Secondary caregiver for a child

The secondary caregiver is the spouse or domestic partner of the child’s primary caregiver. A spouse means a person to whom the primary caregiver is married.

A domestic partner means:

• a person who is in a registered domestic relationship with the primary caregiver, or
• a person who is not married to the primary caregiver but they are living as couple, irrespective of gender, on a genuine domestic basis.

Exempt wages

Exempt wages include wages/salaries, employer superannuation contributions, allowances, bonuses and commissions paid or payable in respect of leave for the employee’s role as a primary or secondary caregiver. Fringe benefits provided to an employee while on parental leave are not exempt (clause 17B(5) of Schedule 2 of the Act).

Wages paid in respect of sick leave, recreation leave, annual leave or any similar leave taken in connection with a pregnancy or the birth or the adoption of a child are not exempt. This means that if an employee uses a mix of leave types in relation to a pregnancy or adoption, only the wages in respect of parental leave are exempt.

Wages must relate to the period of parental leave to be exempt. This does not include:

• Payments made during the period of parental leave that relate to services provided prior to the period of leave, such as back pay, commissions relating to sales that were made prior to the period of leave or an annual performance bonus to the extent that it relates to a period outside the period of leave.
• Advance payments for future periods of service occurring after the employee returns from parental leave.

If an employee takes parental leave in distinct parts, the exemption applies to wages in respect of each part.

Maximum entitlement

For any one pregnancy or adoption, the exemption is limited to wages for a maximum of 14 weeks full time leave for a full time employee or the equivalent amount if taken over a longer period, e.g. 28 weeks leave being paid at half pay. In the case of a part-time employee, the exemption is limited to a maximum of 14 weeks leave paid at the applicable part-time rates of pay.

The exemption is available for wages up to the maximum entitlement for both a primary caregiver and a secondary caregiver.

Record keeping

Parental leave for primary caregivers

To claim the exemption in respect of parental leave for an employee’s role as a primary caregiver, an employer must obtain and keep a statutory declaration from the employee stating that the employee is a primary caregiver for the child and:

• is pregnant with the child, or
• was pregnant with the child and the date of birth of the child, or
• is the parent of the child who has the principal role of providing care and attention to the child.

Parental leave for secondary caregivers

To claim the exemption in respect of parental leave for an employee’s role as a secondary caregiver, an employer must obtain and keep a statutory declaration from the employee stating:

• that the employee is a secondary caregiver for the child, and
• whether the employee is a spouse, or domestic partner, of the person who is the primary caregiver for the child.

The statutory declarations substantiating a claim for the parental leave exemption must be kept for five years (section 55 of the Taxation Administration Act 1997).

Commissioner of State Revenue

Note: Rulings do not have the force of law. Each decision made by the State Revenue Office is made on the merits of each individual case having regard to any relevant ruling. All rulings must be read subject to Revenue Ruling GEN-001.