Maternity, adoption and paid parental leave

Do not include exempt maternity or adoption payments with your taxable wages for Annual Reconciliation purposes.

Exempt basis

Wages paid to employees on maternity or adoption leave are exempt from payroll tax. The exemption applies as follows:

  • All wages, other than fringe benefits, paid or payable to female employees taking maternity leave and male and female employees taking adoption leave are exempt.
  • The exemption does not apply to paid sick leave, annual leave, recreation leave, long service leave or any similar leave taken while the employee is absent due to pregnancy or adoption.
  • The exemption is limited to a maximum equivalent of 14 weeks full-time pay for full-time employees and 14 weeks part-time pay for part-time employees in respect of pregnancy or adoption.
  • The exemption applies irrespective of whether the leave is taken before or after the birth or adoption.

To claim the maternity leave exemption, the employer must obtain a medical certificate or statutory declaration from the employee specifying that the employee was pregnant or that the employee has given birth and the date of birth. To claim the adoption leave exemption, the employer must obtain a statutory declaration from the employee stating that a child has been placed in the employee's custody pending the making of an adoption order or that an adoption order has been made or recognised in the employee's favour.

Paid parental leave

From 1 January 2011, the Australian Government implemented a Paid Parental Leave Scheme. This is different to the maternity leave and adoption leave paid by the employer. Even though Paid Parental Leave payments are paid by employers, they are not taxable as they are not paid for services and are paid on behalf of the Australian Government.

Assistance

If you need further information on this topic, please contact our payroll tax enquiry service on 13 21 61.

Further references

  • Revenue Ruling GEN-001 - explains the status and effect of revenue rulings,
  • Revenue Ruling PTA-012 - Exemption for maternity and adoption leave pay,
  • Revenue Ruling PTA-037 - Paid Parental Leave,
  • Publication PTX-01-12 - Changes to the maternity and adoption leave exemption.