A couple of positive changes coming to the Paid Parental Leave Scheme that will affect you if your child is born after 1 January 2020.
Change to the gap allowed between two working days
When calculating if you meet the Work Test during the 13 months before your due date, you are currently allowed a gap between two work days of up to 56 days.
This means that if you don’t perform any paid work for up to 8 weeks during this time you will still be eligible for Paid Parental Leave. (Paid leave is considered to be a ‘work’ day and doesn’t count towards this gap.)
From 1 January 2020, this will become 12 weeks.
This is very useful for those who are on contract work or even if you are out of work for an extended time during your pregnancy.
Dangerous Jobs Provision
If your pregnancy forces you to stop work due to safety concerns, it’s possible that you wont work enough hours to meet the Work Test and therefore will miss out on receiving Paid Parental Leave. This may no longer be the case if you meet the following conditions:
- you’re pregnant or the birth mother of a newborn child
- your child’s date of birth is on or after 1 January 2020
- you stopped work because a workplace hazard was a risk to your pregnancy
- you won’t meet the work requirements in the 13 month work test period ending the day before your child’s birth,
then you may now meet the number of hours as the 13 months used to calculate this will now end on the day that you had to finish work instead of the date of birth.
You will still need to meet all of the eligibility requirements of the Work Test, but the dates involved in your calculation will be moved.
YES, paid parental leave is taxable income. How much is taken out really depends on the circumstances of your leave arrangement and who is making your payments. In 2019-20, paid parental leave was $740.60 a week and paid through your normal payroll by your employer or directly through Centrelink.
Paid by your employer
If this is your only income during the 18 weeks from your employer then you should get $648 a week after tax. However everyone’s situation is different and you may be receiving other leave payments at the same time such as annual leave or employer paid maternity leave. Your employer will take the amount of tax that is relevant to your situation so it may be different to someone else you know getting paid parental leave at the same time as you.
Also as it is paid through your employers normal payroll cycle, if you are only paid once a month then you will only receive your paid parental leave payment at this time. You should receive a pay slip with your payment from your employer similar to what you would have received if paid your normal salary.
I was fortunate to also receive paid maternity leave from my employer for 13 weeks. Therefore during my normal pay cycle each fortnight I was receiving my Paid Parental Leave plus my maternity leave pay from my employer. This meant that more tax was taken out of my fortnightly pay than if I was just receiving my PPL. For my second child I chose to have my 13 weeks of maternity leave pay spread out over 26 weeks at half pay. Therefore the amount taken out of my pay in tax would have been different again.
Paid by Centrelink
If you receive your Paid Parental Leave directly from Centrelink then your rate of tax is different again. This might occur if you are self employed or have not worked for your employer for longer than a year or even if you don’t intend to return to that employer. In this case the rate of tax that Centrelink will take out of your payment is 15%. This reduces your payment down to $629.50
Income Tax Return
What all of this also means is that your Paid Parental Leave taxable income needs to go onto your Income Tax Return. Your employer will still need to give you your annual PAYG Payment Summary which will include your Paid Parental Leave. This is included in your Gross Payment amount and the Total Tax Withheld amount. It doesn’t need to be separately disclosed.
If you have received your payment from Centrelink, they will send you a PAYG Payment Summary directly which will include the Paid Parental Leave details for you to include in your tax return or it may already be included in your myGov tax return.
Where should you start? Here with your free checklist:
I have created a free checklist for you to download. It will help you to gather the exact information you will need when you sit down and prepare your application. Enter your details below and the PPL Checklist will be emailed to you.
Do you ever study the letters that you get from your Superannuation fund at the end of the financial year? Or from all the many Super funds that you may have money invested with? You might just look at the total balance as it’s in big bold numbers! While it’s good to see contributions increasing your balance, there are two main items that actually reduce the balances of your fund each year – fees and insurances.
Yes, insurances. It is most likely that when you opened an account with a Super fund you were automatically given all, or a combination of, life insurance, total and permanent disability (TPD) insurance and income protection insurance as part of your Super. These were most likely set up automatically for you whether you asked for them or not. It’s currently an op-out system. You may not have noticed them as they are not paid from your pocket, rather from the balance that is held in your Super fund. So it’s a a bit out of sight out of mind 🙂
For some of you, they are a nice security to have in case the worst should happen. For others they are just a drain on your overall balance. Especially if you are paying for insurances in more than one Super fund. That means you could be paying for the exact same thing twice without realising.
From 1 July 2019, new laws begin that require that these insurances be cancelled for you if your Super account is considered to have been ‘inactive’ for at least 16 continuous months. Inactive means that no contributions have been put into your fund by yourself or your employer during this time.
Who is affected the most?
I thought about who of you would most likely be put into this category and the most obvious to me are those of you who are taking extended time off work to care for children and no employer is making contributions for you.
Also those of you who are self-employed and not making regular contributions yourself into your Super fund. Does this sound like you?
Your Super fund should actually have contacted you to tell you that you are impacted by these changes, but very few people seem to be aware that this is happening.
What do you need to do?
1.If you want your insurance policies to remain and you want your Super fund to continue to make payments towards this, you will need to contact your fund them and tell them this. Especially if they have not contacted you.
2. If you are happy for your insurance policies to end, you can choose to do nothing with your inactive Super accounts. Your insurances will just be automatically cancelled if they have reach 16 months of inactivity after 1 July 2019.
If you don’t know what fund you have Super balances with, log into your myGov account. Select
- Fund Details
You will then see a list of all your open funds. When you click the arrow beside each fund it will tell you if you have made a recent contribution and if your have insurance for that fund. It will also give you a link to the contact details of each fund so that you let them know if you want your inactive accounts to continue to pay for insurance.
This will also tell you how much you have in total in Super – nice to know even though you may not use it for a long time!
This isn’t financial advice!
I am not writing this to give your any advice as to whether or not your should keep your insurances attached to your Super. It is just meant to make sure that you are aware that this may impact you and allow you to do something about it by 1 July 2019 if insurance within Super is important to you.
For any specific information it is best to speak to your Super fund or any finance professional that you ordinarily use. For more information, a good website to review is timetocheck.com.au
The new school year is already a few weeks old already so I thought it would be a good idea to go through some of the changes to your Child Care Subsidy that occur when transitioning from child care to full time school.
You can continue to receive the Child Care Subsidy for each child up until they are 13 years old and not attending secondary school. If you have started using a before and after school care programs or holiday program that is appropriately approved with Centrelink you can continue to receive the Child Care Subsidy toward those fees – which is great!
Changes to your Hourly Rate Cap
The amount of Child Care Subsidy that you receive per child, per hour is dependent on your income, how many Activity hours you perform per fortnight and the type of service that you use. Different types of services have different hourly rate caps. If you want more details on the calculation of your Child Care Subsidy then refer here.
The cap is the maximum amount per hour that you could receive Child Care Subsidy for. If you pay more to your centre per hour than the hourly rate cap then you will be out of pocket for 100% of this gap.
Centre Based Care has an hourly rate cap of $11.98 (for 2019-20), Family Day Care is $11.10 and Outside School Hours Care (OSHC) is $10.48. OSHC includes before, after and vacation care.
Your Subsidy Rate percentage should stay the same as this is based on your income. But the dollar amount that you receive as a subsidy per hour will decrease as it is calculated as a percentage on the hourly rate cap which has now become lower.
Tell Centrelink that your child has started school
As mentioned above, the hourly rate cap is reduced when your child starts school. However you still need to tell Centrelink that your child has started school as they won’t automatically know this.
You can do this in mygov. Click on the Menu button in the top left corner. Go to Child Care Subsidy – View/Update Child Education Details. Click the little pencil button and change the status from ‘has not commenced studies’ to ‘Primary Education.’ Then add the date that they started school.
In the Centrelink App you do this by clicking on the Child Care Subsidy Button and click on your child’s name. Update the Schooling Details information down the bottom of the list.
What you should also know is that if your child turns 6 while attending Centre Based Care – they will automatically be moved to the OSHC rate even if they haven’t yet started school.
Confirm any new enrolments
When you enrol in a new program or centre, the centre will lodge those details with Centrelink. You will then be required to confirm your enrolment and ensure that the information that has been lodged for you is correct.
You can do this through mygov and also through the Centrelink App. It’s actually very simple as the enrolment should already be listed and you just need to check it, click confirm and it’s done.
In mygov it’s through the Menu button Child Care Subsidy/ Enrolments. Check if any of the Enrolments say Unconfirmed, View the details and confirm if correct.
In the Centrelink App it is confirmed through the Child Care Subsidy Button. Look for the Enrolments listed under each child’s name. If any say Unconfirmed, click on those, check the details and use the Tick at the bottom to confirm the information.
Review your income
And finally, since you are making changes to your arrangements, it’s always a good idea to review the family income estimates you have recorded with Centrelink for both you and your partner.
Making changes now could stop any over or underpayments being made once the financial year has ended and you tax return lodged.
The minister for women, Kelly O’Dwyer has released the government’s ‘Women’s Economic Security Statement’ which includes changes to Paid Parental Leave. There are a large number of other initiatives that are designed to improve women’s financial security by focusing on workforce participation, earning potential and economic independence.
The start date for these initiatives will be 1 July 2020.
There is a significant focus in the Statement on helping victims of domestic violence achieve economic independence through early access to superannuation and increased funding for no interest loans.
The changes to Paid Parental Leave Scheme are designed to improve the flexibility of the current system, especially for those who are self employed and small business owners.
I regularly discuss with small business owners the problem of keeping their business going while meeting the requirements of the PPL Scheme of not working for 18 weeks. Few small business have that option available to them.
The proposed changes include:
Splitting your Paid Parental Leave into separate blocks.
Currently you must take the entire 18 weeks of payments in one continuous block. If you need to return to work before your 18 weeks are finished then you lose any remaining PPL. Currently about 2,300 people return to work each year before they have received the full 18 weeks of their payment entitlement and they miss out.
The new initiative will mandate the first 12 weeks to be taken within the first year of the child’s life, but the second block of six weeks can be taken within the first two years.
Changes to the Work Test
The current Work Test requires that you work for 330 hours in 10 months out of the 13 months before your due date. This must be done without a gap of more than 8 weeks between two work days.
The new initiative will allow for greater flexibility in the Work Test with gaps of up to 12 months allowed. There will also be the ability to move your Work Test dates forward should you have to stop work earlier in your pregnancy than expected.
The no interest loan scheme is already available and further information can be found here: https://goodshepherdmicrofinance.org.au/services/no-interest-loan-scheme-nils/
I will keep updating this page each time more information is announced on the changes to Paid Parental Leave.
I have created a free checklist that you can download to help you gather the information you will require when you sit down and prepare your application. Enter your details below and the PPL Checklist will be emailed to you.
As always, feel free to ask any questions.
Download Making Sense of Paid Parental Leave for $17.
- Get your application completed all online.
- Review the different tests and apply them to your situation.
- Understand how it affects your tax.
- Learn about Dad & Partner Pay .
- Stop wanting to pull your hair out trying to get it done!