Concerns grow over paid parental leave scheme

Accounting bodies are urging the Federal Government to review its proposed paid parental leave scheme, which they say will unnecessarily burden small businesses.

Under the proposed system, employers will make the payments directly to employees, after receiving the money from Centrelink. Employees will still have to go through Centrelink to establish eligibility for the scheme.

But the National Institute of Accountants and CPA Australia says the system is too complicated and will force small businesses to bear the costs of restructuring their payroll and accounting systems.

“Two weeks ago the ABS put out statistics that show only 4% of Australian businesses are currently doing voluntary paid parental leave. So a substantial number of businesses have never handled parental leave payments,” says CPA business policy adviser Gavin Ord.

“It’s something that’s quite new to them and it means changes to their payroll systems and accounting systems. There are also questions about how they should treat the payments once they receive them from Centrelink – should they hold them in trust, or what should they do with them?”

Ord says questions around eligibility requirements also remain unanswered. “There are a lot of questions here that the Government needs to be aware of.”

“The feedback we’ve had from our members is that the payment system will complicate things significantly for small businesses.”

The proposed payment system is based on the rational that employees receiving payments through their employers will maintain a stronger relationship with their employers and the workforce.

But NIA senior tax adviser Tony Greco says the proposed benefits are nothing new. “You’d expect that the good employers will be doing all they can to maintain the connection with their staff [on parental leave] already. I’d think that the vast majority of employers are already maintaining contact and keeping in touch with their staff.”

And the system comes on top of already complicated Government requirements for small businesses, Greco says.

“Small businesses have so many administrative duties already, from tax to superannuation, and this will only add to the burden on small businesses, which are the biggest employers of Australian workers.”

“For small businesses, we want to take away from their administrative burden – not add to it.”

The Federal Government has committed $231 million over five years for paid parental leave, which will be available on or after Jan 1, 2011. Parents will be able to lodge claims from October 1, 2010.

To be eligible for payments, a parent must have been engaged in work continuously for at least 10 of the 13 months prior to the expected birth or adoption of the child.

In addition, the parent must have undertaken at least 330 hours of paid work in the previous 10 month period, with an minimum average of 7.6 hours per day.

The scheme will cover all employees, including casual employees, the self-employed and contractors. An income test of $150,000 will apply based on the person’s adjusted taxable income in the previous financial year.