If your employee takes paid leave for the birth or adoption of a child, you may be eligible for a payroll tax exemption on those wages.
This exemption applies to employer paid primary and secondary caregiver leave.
As the Commonwealth Government paid parental leave scheme is paid for by the government, it doesn’t count as wages for payroll tax.
Wages are exempt from payroll tax if the leave:
- is for the birth or adoption of a child
- is taken as primary or secondary caregiver leave.
Maximum entitlement
The exemption is for a maximum of 14 weeks of paid leave per child.
- For full-time employees, this means 14 weeks at full pay, or a longer period at reduced pay (for example, 28 weeks at half pay).
- For part-time employees, the exemption is based on 14 weeks at their usual part-time rate.
Primary and secondary caregiver leave
You can claim the exemption for wages paid or payable to either a primary or secondary caregiver.
Primary caregiver
This primary caregiver is the main person responsible for caring for the child. This can be the birth parent or another parent, regardless of gender. Only one person can be the primary caregiver at a time.
Secondary caregiver
The secondary caregiver is the partner of the primary caregiver. This includes:
- a spouse (a person married to the primary caregiver)
- a domestic partner, meaning:
- 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 lives with them as a couple on a genuine domestic basis, regardless of gender.
Exempt wages
Exempt wages include:
- salary or wages
- superannuation contributions
- bonuses, allowances and commissions.
The exemption does not apply to:
- annual leave
- sick leave
- long service leave
- unpaid leave
- any other leave not labelled as caregiver leave.
Fringe benefits provided to an employee on primary or secondary caregiver leave are not exempt.
Please refer to Revenue Ruling PTA-012v2 - Exemption for parental leave for information on wages paid for parental leave.
Examples
Primary caregiver
Lou takes 10 weeks of long service leave, 4 weeks of annual leave, 12 weeks of primary caregiver leave and 26 weeks of unpaid leave. Only the 12 weeks of caregiver leave are exempt.
Secondary caregiver
Johan takes 6 weeks of paid leave in 3 distinct parts to adopt a child. All 6 weeks are exempt because they are taken as secondary caregiver leave.
Part-time secondary caregiver
Chris is a part-time employee who works 3 days a week and earns $300 per day (including super). He takes 14 weeks of secondary caregiver leave. The maximum exempt amount is $12,600 ($300 × 3 days × 14 weeks).
Primary caregiver half pay
Stella’s workplace offers 12 weeks of paid caregiver leave. She elects to take primary caregiver leave over 24 weeks at half pay. Wages relating to this period are fully exempt.
Employer leave and bonus
Emily is a full-time employee who earns $1,000 per week (including super). She takes 12 weeks of employer-paid caregiver leave ($12,000) and a one-off bonus of $2,000. She also takes 40 weeks of unpaid leave.
With the bonus, her total payment is $14,000. The maximum exemption is $14,000 (14 weeks × $1,000). The full $14,000 is exempt from payroll tax.
Employer leave and extra superannuation
Alice is a full-time employee who earns $1,500 per week plus $172.50 in employer superannuation (total $1,672.50 per week).
Her employer gives her 13 weeks of paid parental leave. After that, while she’s on unpaid leave, her employer continues to pay $172.50 per week in super for another 39 weeks.
In total, Alice receives $28,470:
- $21,742.50 for 13 weeks of paid leave
- $6,727.50 in super during unpaid leave
The maximum exemption is $23,415 (14 weeks × $1,672.50). So $23,415 is exempt from payroll tax. The remaining $5,055 is taxable.
Part-time leave at half pay
Paola works part-time, 4 days a week, earning $400 per day (including super). Her usual weekly pay is $1,600.
She chooses to take her parental leave at half pay, so her employer pays her $800 per week for 28 weeks, totalling $22,400.
The maximum exemption is based on her normal work pattern ($400 × 4 days × 14 weeks = $22,400). Since her total employer-paid leave equals the maximum, the full $22,400 is exempt from payroll tax.
Employer leave plus Commonwealth paid parental leave
Helena is a full-time employee who earns $2,000 per week (including super). She has a baby in September 2024.
Helena is eligible for the Commonwealth paid parental leave scheme and receives $915.80 per week for 22 weeks. These payments are made by the government and are not subject to payroll tax.
Her employer also provides paid parental leave to top up her pay to her usual weekly wage. The employer pays Helena $1,084.20 per week for 22 weeks, totalling $23,852.40.
The maximum exemption for employer-paid caregiver leave is $28,000 (based on Helena’s normal wage of $2,000 × 14 weeks). Because the total employer-paid amount is less than the maximum, the entire $23,852.40 is exempt from payroll tax.
Record keeping
To claim the exemption, employers must keep proper records. This includes obtaining a statutory declaration from the employee.
For the primary caregiver, the declaration must specify:
- that the employee is the primary caregiver for the child
- whether the employee is or was pregnant with the child (and the child’s date of birth) or has the principal role of providing care and attention to the child.
For the secondary caregiver, the declaration must state:
- that the employee is the secondary caregiver for the child
- whether the employee is the spouse or domestic partner of the child’s primary caregiver.
Employers must retain these records for at least 5 years unless we allow you to destroy them earlier.
