Budget 2022: parental leave changes benefit families

Optimising income-earning potential for couples just got a little easier with a surprisingly generous expanded parental leave package.

Parental leave arrangements are now more flexible. Picture: iStock

A $346m boost for families in this year’s federal budget came in the form of an overhaul of paid parental leave that will give couples more flexibility in accessing the scheme, while opening up the program to thousands of families for the first time.

Under current rules, new mothers are eligible for up to 18 weeks of parental leave pay, while secondary carers are provided with two weeks of “Dad and partner pay”.

The proposed changes mean couples will now be able to decide how they want to split the new combined 20-week scheme, providing an opportunity to optimise their income earning potential.

For women who earn more than their partners, it allows for an earlier return to the office while boosting the family’s take-home pay over a portion of the 20 weeks without sacrificing access to the parental leave scheme, which is indexed to the minimum wage.

Take the example of a woman who earns $130,000 a year and her partner earns $80,000. Under the old rules, the family would sacrifice $19,600 in take-home pay if the woman took 18 weeks government parental leave and her partner took the two weeks “Dad and partner pay”.

Under the proposed changes, the couple would be $10,000 better off if the woman’s partner took 18 of the 20 weeks parental leave. (This assumes neither parent receives additional parental leave pay from their employer.)

According to the government, the parental leave overhaul, at a cost of $346.1m over five years, will particularly support women who are primary earners and do not have access to employer-funded parental leave.

According to superannuation minister Jane Hume, it also has the potential to reduce the gender super gap, which the government currently puts at 23.4 per cent, by allowing for a more equal division of time out of the workforce.

Single parents will also be able to access the full 20 weeks on the leave scheme for the first time.

While the payments under the government scheme will be unchanged, at $772 a week, the threshold for eligibility has increased substantially, again to the benefit of women on high incomes.

Currently, mothers who earn up to $151,350 can access Parental Leave Pay even if their partner earns a high income, but women on salaries higher than $151,350 are not entitled to the payments, even if their partners have no income.

According to the government, the number of women earning more than $150,000 a year more than doubled from 99,800 in 2010 to 209,600 in 2017.

The new threshold for eligibility is a combined household income of $350,000.

Some analysts have questioned whether the new measure will make sufficient changes fast enough: According to the Partners Wealth Group, ‘‘ these ambitions will take many years to reap any benefits’. Meanwhile, the government had also been under pressure to add super to parental leave and some super funds have criticised the absence of super guarantee payments in the parental leave scheme changes: Industry fund Rest Super calling it a missed opportunity.

“We welcome the changes to expand the Paid Parental Leave Scheme so it is more flexible and accessible,” Rest CEO Vicki Doyle said.

“However, without Superannuation Guarantee payments, these changes do not go far enough. This measure should be introduced without further delay, and we call on both major parties to commit to it ahead of the upcoming federal election.” Other groups have argued the changes

Originally published as Budget 2022: parental leave changes benefit families