Paid Parental Leave in Australia: What employers are required to pay

Published Friday 10 July 2026

Table of contents

• What is paid parental leave in Australia?
• Who is eligible for paid parental leave?
• What must employers pay?
• Do I withhold tax or pay super?
• How does paid parental leave work for employers?
• What should a parental leave policy include?
• Simplify parental leave with Xero
• FAQs on paid parental leave

Key takeaways

• Pass on government-paid parental leave when directed, withhold tax, and pay on the usual cycle. Only pay wages or top-ups if your policy or an industrial instrument requires it.
• Don't pay superannuation on government-paid parental leave. Apply super and leave accruals only to employer-funded top-ups if your policy or award requires it.
• Set up payroll to separate government PPL from any employer top-ups .Map tax and Single Touch Payroll correctly, and keep clear records.
• Use simple processes and clear policies so you meet employer-paid parental leave obligations in Australia with confidence.

What is paid parental leave in Australia?

Paid parental leave in Australia comes in two forms: government-funded Parental Leave Pay administered by Services Australia and employer-funded schemes that some businesses choose to offer. You need to understand the difference to meet your obligations.

Government Paid Parental Leave or Parental Leave Pay (PPL) is funded by the Australian government and delivered through Services Australia. Eligible employees receive up to 24 weeks (120 days) of government-funded pay at the national minimum wage, currently $200.98 per day before tax. This scheme supports working parents who meet specific work, income, and residency tests.

Employer-funded parental leave is any additional payment your business provides beyond the government scheme. This might include topping up government payments to full salary, offering extra weeks of paid leave, or providing other benefits during the parental leave period.

The key distinction for small employers is that you’re only required to pass on government payments when Services Australia directs you to do so. Any wages, top-ups, or additional benefits are voluntary unless required by an award, enterprise agreement, or your own written policy.

Your role as an employer depends on whether your employee nominates you to deliver their government Parental Leave Pay. If they do, Services Australia will contact you with instructions and funding. If they choose to receive payments directly from Services Australia instead, you have no obligation to process government PPL through your payroll.

For more guidance on your broader responsibilities, see this employer responsibilities guide.

How much is Parental Leave Pay?

Parental Leave Pay is paid at the national minimum wage rate, currently $200.98 per day before tax (based on the national minimum wage of $1,004.90 per week). Employers pass on whatever rate Services Australia specifies at the time of payment.

The total duration of government PPL is changing:

• Before 1 July 2026: 120 days, which is 24 weeks based on a five-day work week
• From 1 July 2026: 130 days, which is 26 weeks based on a five-day work week
• Rate: Paid at the national minimum wage, set each financial year by the Fair Work Commission

If your employee claims before 1 July 2026, their PPL balance will be 120 days. If they claim on or after that date, their balance will be 130 days.

Who is eligible for paid parental leave?

Paid parental leave eligibility is assessed by Services Australia, not by the employer. Your role is to understand which employees are likely to qualify so you can plan payroll, cash flow, and policy in advance.

Employees apply directly to Services Australia. If approved and they nominate you as their employer, you'll receive instructions to deliver the payments.

What are the eligibility requirements for employees?

Employees must meet three tests to qualify for government Parental Leave Pay:

• Work test: The employee must have worked at least one day in 10 of the 13 months before the birth or adoption, with no more than eight weeks' break in that period. This includes full-time, part-time, casual, and self-employed workers.
• Income test: The employee's adjusted taxable income must be $180,007 or less in the financial year before the birth or adoption, or in the current financial year.
• Residency test: The employee must be an Australian resident at the time of the birth or adoption.

Services Australia assesses eligibility. It contacts you only if the claim is approved and your employee nominates you to deliver the payments.

Does the employee nominate their employer?

Employer nomination is the step that triggers your payroll obligations. Employees can choose to receive Parental Leave Pay (PPL) payments directly from Services Australia or through their employer.

If your employee nominates you:

• Services Australia contacts you with payment instructions and funding
• You deliver the payments on your usual pay cycle
• You withhold tax and report via Single Touch Payroll (STP)

If your employee does not nominate you, Services Australia pays them directly and you have no obligation to process PPL through your payroll.

What must employers pay?

Your employer paid parental leave obligations in Australia depend on three factors: government directions, industrial instruments, and your own policies. Let's break down what you must pay and when.

Do employers have to pay wages during PPL?

You only need to pay wages during parental leave when one of the following applies:

• Government direction: Services Australia instructs you to pass on government Parental Leave Pay to your employee. When this happens, you receive funding from Services Australia and pay it to the employee on your usual pay cycle, withholding tax as required.
• Industrial instrument: Your employee is covered by an award or enterprise agreement that requires paid parental leave. Check your award or agreement carefully for specific entitlements, rates, and conditions.
• Your policy: You have a written parental leave policy that commits to paying wages, a top-up, or other benefits during the leave period.

You only have to pay wages when at least one of these conditions applies. The employee may receive government payments directly from Services Australia, or they may take unpaid parental leave under the Fair Work Act.

Do I need to top up to full pay?

Top-ups are entirely optional unless your policy or industrial instrument requires them. A top-up is when you pay the difference between government Parental Leave Pay and the employee's usual salary so they receive their full pay during leave.

If you choose to offer a top-up, make sure you document:

• the rate (for example, 100% of ordinary salary)
• the duration (for example, 12 weeks, 18 weeks)
• whether superannuation applies to the top-up amount
• whether annual or personal leave accrues during the top-up period
• any conditions, such as requiring the employee to return to work for a set period

Clear documentation protects both you and your employee. It sets expectations, prevents disputes, and ensures your payroll processes align with your obligations. For help managing these details, explore our payroll compliance guide.

Do I withhold tax or pay super?

Tax and superannuation treatment of paid parental leave depends on the source of the payment. Government payments and employer top-ups are treated differently, so it's important to get this right.

Recent changes to Australian law will require superannuation to be paid on government-funded parental leave from 1 July 2025 to help close the retirement savings gap.

Historically, time taken off for parental leave has negatively impacted retirement savings, particularly for women, who on average retire with about 25% less super than men.

Do I pay super on PPL or on top-ups?

Don’t pay superannuation on government Parental Leave Pay in most cases. The ATO confirms that government PPL is not ordinary time earnings (OTE) for superannuation purposes, so you are not required to make super contributions on these amounts.

For parents with babies born or adopted on or after 1 July 2025, the amount paid will be calculated based on the superannuation guarantee rate, equalling an additional contribution of 12% of their Parental Leave Pay.

The Australian Taxation Office will make the first payments from 1 July 2026 as a lump sum following the end of each financial year.

Apply superannuation only if your policy, award, or enterprise agreement treats the top-up as ordinary time earnings. If your policy states that super applies, or if your award requires it, you must calculate and pay the superannuation guarantee on the top-up amount at the current rate of 12% as of 1 July 2025.

Always check your specific award or agreement. Some instruments require super on employer-funded parental leave, while others do not. Document your approach clearly in your policy and payroll setup.

For more information, visit our superannuation obligations guide.

Do leave entitlements accrue during PPL?

• Government PPL or unpaid parental leave: Annual leave and personal leave usually don’t accrue during periods of government-funded parental leave or unpaid parental leave. The Fair Work Act does not require leave accrual during these periods.
• Employer-funded paid parental leave: Leave accruals may apply if your policy or industrial instrument counts employer-funded parental leave as paid service. If your policy states that annual and personal leave accrue during the paid period, you must apply those accruals in your payroll system.

Again, clarity is key. Define in your policy whether leave accrues, and configure your payroll software to match. This prevents confusion and ensures compliance when employees return to work.

How does paid parental leave work for employers?

Understanding the flow of paid parental leave helps you manage the process smoothly. Here's a step-by-step summary of what happens when an employee applies for government Parental Leave Pay and nominates you as their employer.

• Employee applies: Your employee applies to Services Australia for Parental Leave Pay, providing evidence of their work, income, and residency. They nominate you as their employer if they want you to deliver the payments.
• Services Australia approval: Services Australia assesses the application and, if approved, contacts you with instructions. You'll receive a notice outlining the payment period, the daily rate, and the total amount to pay.
• Employer registration: If you haven't already, you'll need to register with Centrelink Business Online Services to accept the arrangement and receive funding.
• Pay on usual cycle: You pay the employee on your usual pay day, adding the approved PPL amount to their pay run. You withhold tax (PAYG withholding) and issue a clearly labelled payslip line for PPL.
• Keep records: Maintain records of the payments, tax withheld, and Services Australia funding received. Reconcile regularly to ensure accuracy.

See our guide on setting up and running payroll correctly.

How do I register with Services Australia?

When Services Australia directs you to deliver Parental Leave Pay, you'll need to register through Centrelink Business Online Services. Follow these basic steps:

1. Create or link a Centrelink Business Online Services account. Add your business details, including ABN and contact information.
2. Nominate bank, contact, and pay cycle details. This tells Services Australia when and how to fund the payments.
3. Accept the employee's Paid Parental Leave arrangement when requested by Services Australia. This confirms you agree to pass on the payments on the specified dates.

Once registered, Services Australia will transfer funds to your nominated bank account before each pay period. You then include the PPL amount in the employee's pay, withhold tax, and report via Single Touch Payroll.

How do I make payments and withhold tax?

The payment process is straightforward once you're set up. Here's the simple pay-run process:

1. Add the approved PPL amount to the employee's normal pay on the usual pay day. Services Australia will specify the daily rate and number of days to pay.
2. Withhold PAYG (Pay As You Go withholding) from the PPL amount as you would from ordinary wages. The employee's tax file number declaration and tax scale apply.
3. Issue a clearly labelled payslip line for PPL, separate from any other earnings. This transparency helps the employee understand their pay and supports accurate record-keeping.

Keep detailed records of each payment, the tax withheld, and the funding received from Services Australia. Reconcile these amounts regularly to catch any discrepancies early.

How do payments flow and affect cash flow?

Services Australia funds the approved amounts in advance, transferring money to your nominated bank account before the pay period. You then pay the employee on your usual schedule and reconcile the funding received against what you paid.

Timing differences can occur. For example, if your pay cycle doesn't align perfectly with Services Australia's funding schedule, you may need to manage short-term cash flow gaps. Plan for this by:

• Reviewing the payment schedule provided by Services Australia
• Tracking funding receipts in your accounting system
• Reconciling regularly to ensure you've received the correct amounts
• Keeping a small buffer in your payroll account if needed

Most small employers find the process manageable once they understand the flow. The key is to keep clear records and reconcile frequently.

What are keeping in touch days?

Keeping in touch (KIT) days allow employees to work limited days during their parental leave period without losing their government Parental Leave Pay. Employees can work up to 10 KIT days during the PPL period.

• How to pay KIT days: Pay KIT days as time worked, separate from PPL payments. The employee receives their usual hourly or daily rate for the hours worked, and you apply the normal tax, super, and leave accrual rules to those earnings.
• Why KIT days matter: They help employees stay connected to the workplace, ease the transition back to work, and allow you to access their skills for critical projects or training. They are entirely voluntary and must be agreed between you and the employee.

Document any KIT days worked in your payroll system and keep records of the dates, hours, and payments made. This ensures clarity and supports accurate reporting.

How do I create leave types and pay items in payroll software?

Create separate earnings items and leave types to keep government PPL and any employer top-ups clearly distinguished in your payroll system.

• Government PPL earnings item: Create a separate earnings item labelled "Government Paid Parental Leave" or similar. Configure it with PAYG withheld and no superannuation by default, reflecting the ATO's guidance that super is not required on government PPL.
• Employer top-up earnings item: If you offer a top-up, create a distinct earnings item labelled "Parental Leave Top-Up" or similar. Configure super and accrual settings to align with your policy or award. For example, if your policy states that super applies and leave accrues during the top-up period, enable those settings.
• Parental leave type: Add a parental leave type in your leave settings for visibility in timesheets and records. This helps you track when employees are on leave and supports accurate reporting.

Clear labelling and correct configuration ensure that each payment is processed correctly, reported accurately via Single Touch Payroll, and reconciled easily against Services Australia funding.

How do I process PPL and any top-ups?

When processing a pay run that includes government PPL or an employer top-up, follow these steps:

1. Add the government PPL line to the usual pay cycle and label it clearly (for example: Government PPL - [dates]). Enter the approved amount provided by Services Australia.
2. Add any employer top-up as a separate line so super or accruals apply correctly. For example, if you're topping up to 100% of salary, calculate the difference between the government PPL and the employee's usual pay, and enter it as the top-up amount.
3. Reconcile Services Australia funding to payroll and bank activity. Check that the funding received matches the PPL amounts paid, and resolve any discrepancies promptly.

Keeping government PPL and employer top-ups on separate lines makes it easy to see what's funded by Services Australia and what's funded by your business. It also simplifies tax reporting and super calculations.

How do I report paid parental leave via STP?

Single Touch Payroll (STP) reporting requires accurate mapping of earnings categories so the ATO receives correct information about PPL and top-ups.

• Map earnings categories. Ensure your government PPL earnings item is mapped to the correct STP category (typically "Paid Parental Leave" or as specified by the ATO). Employer top-ups should be mapped according to their nature. For example, if they are treated as ordinary earnings for super purposes, map them accordingly.
• Include PPL and top-ups in regular submissions. Report both government PPL and any employer top-ups in your regular STP pay event submissions. The ATO uses this data to track payments and ensure compliance.
• Keep approval notices on file. Retain copies of Services Australia's approval notices, payment schedules, and any correspondence. These documents support your STP reporting and provide evidence of your obligations if the ATO or Services Australia requests it.

For more on payroll tax and reporting, visit our payroll withholding tax guide.

What should a parental leave policy include?

A clear, well-structured parental leave policy sets expectations, supports consistent decisions, and ensures compliance with Fair Work and any enterprise agreement. Here's what to include.

• Eligibility, notice, and evidence requirements: State who is eligible (for example, employees with 12 months' service), how much notice they must give (for example, 10 weeks before the expected birth or adoption), and what evidence you require (for example, a medical certificate or adoption papers).
• Employer-funded top-up rules: Define the rate, duration, super, and accruals clearly. For example: "Eligible employees will receive a top-up to 100% of their ordinary salary for 12 weeks. Superannuation will be paid on the top-up amount, and annual and personal leave will accrue during this period."
• Flexible use, keeping in touch days, and return to work options: Explain how employees can request flexible arrangements, how KIT days work, and what return-to-work support you offer (for example, gradual return, flexible hours, or training).
• Cross-reference awards or enterprise agreements: Note any relevant award or agreement provisions, and state that the policy is read in conjunction with those instruments. Set a review cadence (for example, annually) to ensure the policy stays current.

A well-written policy protects both you and your employees. It clarifies rights and obligations, reduces disputes, and supports fair, consistent treatment.

How do I coordinate awards and agreements?

If your employees are covered by an award or enterprise agreement, your parental leave policy must align with those obligations.

• Check if your award or agreement requires paid parental leave or top-ups. Some modern awards include parental leave entitlements beyond the government scheme. Review your award carefully or seek advice from Fair Work or an employment lawyer.
• Align super and accrual settings to those obligations and document any above-award benefits. For example, if your award requires super on parental leave top-ups, configure your payroll system accordingly. If you offer more generous benefits than the award requires, state this clearly in your policy.
• Note how changes to industrial instruments affect payroll configuration. Awards and agreements are updated periodically. Review your policy and payroll setup whenever your award changes to ensure ongoing compliance.

Coordinating awards, agreements, and your own policy can be complex. Consider seeking advice from an HR professional or employment lawyer to ensure you get it right.

How do I plan return to work?

Supporting employees as they return from parental leave benefits everyone. A smooth transition helps retain skilled staff, maintains morale, and demonstrates your commitment to work-life balance.

• Set a contact plan during leave and discuss flexible options early. Agree on how and when you'll stay in touch (for example, monthly emails with business updates) and invite the employee to propose flexible return-to-work arrangements well before their leave ends.
• Prepare a re-onboarding checklist and any training needed. Treat the return to work as a mini-onboarding process. Update the employee on changes to systems, policies, or team structure, and provide refresher training if needed.
• Confirm changes to hours, duties, or location in writing. If the employee is returning part-time, working from home, or taking on different responsibilities, document the new arrangements in writing. This prevents misunderstandings and supports clear communication.

A thoughtful return-to-work plan strengthens your relationship with the employee and helps them reintegrate successfully.

Simplify parental leave with Xero

Managing paid parental leave obligations doesn't have to be complicated. With the right tools and clear processes, you can handle government PPL, employer top-ups, tax, and super with confidence. Xero's payroll features let you create separate pay items for government PPL and employer top-ups, configure tax and super settings to match your obligations, and report accurately via Single Touch Payroll.

You can reconcile Services Australia funding, track leave balances, and generate clear payslips all in one system. When you combine Xero's payroll with a well-written parental leave policy and regular reviews, you meet your employer paid parental leave obligations efficiently and accurately. See how easy it is to set up payroll, manage parental leave, and stay compliant when you get one month free.

FAQs on paid parental leave

Here are answers to common questions about employer obligations for paid parental leave in Australia.

How many weeks is paid parental leave in Australia in 2026?

From 1 July 2026, Parental Leave Pay is 130 days, which is 26 weeks based on a five-day workweek. This is an increase from the previous 120 days (24 weeks), so review your payroll planning and parental leave policy to ensure it’s up to date.

Do I have to pay superannuation on government Paid Parental Leave?

No, you generally do not pay superannuation on government Parental Leave Pay. The ATO states that government PPL is not ordinary time earnings for super purposes, so you are not required to make super contributions on these amounts. However, if you provide an employer-funded top-up and your policy or award requires it, you must pay the superannuation guarantee on the top-up amount.

What happens if I don't pass on government PPL when directed?

If Services Australia directs you to deliver government Parental Leave Pay and you fail to do so, you may be in breach of your obligations under the Paid Parental Leave Act. Services Australia can take compliance action, which may include imposing penalties. Always respond promptly to Services Australia notices and seek advice if you're unsure how to comply.

Can an employee work while receiving Paid Parental Leave?

Employees can work up to 10 keeping in touch (KIT) days during their Parental Leave Pay period without losing their government payments. Any work beyond these KIT days may affect their eligibility for government PPL. Pay KIT days as time worked at the employee's usual rate, separate from PPL payments, and apply normal tax, super, and leave accrual rules.

Do I need a written parental leave policy?

While not legally required, a written parental leave policy is strongly recommended. It sets clear expectations, ensures consistent treatment of employees, and helps you comply with Fair Work and any award or enterprise agreement. A good policy covers eligibility, notice requirements, top-up rates, super and accruals, flexible arrangements, and return-to-work support.

How do I reconcile Services Australia funding with payroll?

Services Australia transfers funding to your nominated bank account before each pay period. Reconcile this funding against the PPL amounts you pay to employees by checking your bank transactions, matching them to your payroll records, and resolving any discrepancies promptly.