Maternity pay in Australia: how employers handle it
Reviewed by Mellow Editorial Team, HR & payroll content team
Maternity pay in Australia is not funded by employers directly. The federal government pays Parental Leave Pay through Services Australia, and most employers act as a conduit — running the payments through payroll — rather than bearing the cost themselves.
How Parental Leave Pay works
Parental Leave Pay (PLP) is a government-funded scheme administered by Services Australia. Eligible employees receive payments at the national minimum wage rate for a period of up to 22 weeks (for births and adoptions from 1 July 2023, with a phased increase to 26 weeks by 2026). The employee applies to Services Australia directly; the government assesses eligibility and funds the payment.
Most employers are required to channel those payments through their own payroll system once Services Australia directs them to do so. This happens when the employee has worked for you for at least 12 months before the expected date of birth or adoption, and where you have 1 or more employees.
If you are a smaller employer or meet certain exemptions, Services Australia may pay the employee directly rather than routing payments through you.
The exact process for employers
Once Services Australia determines that payments should flow through your business, the process runs like this:
1. You receive a notice from Services Australia confirming your role as the "employer-channel" payer and the payment amounts and schedule.
2. Services Australia transfers funds to you ahead of each pay cycle, so you are never out of pocket.
3. You include the payment in the employee's normal pay run and report it through Single Touch Payroll (STP) at each pay event, exactly as you would with ordinary wages.
4. PAYG withholding applies — Parental Leave Pay is taxable income, so you withhold income tax at the employee's marginal rate and remit it to the ATO as usual. If the employee has a HECS/HELP debt, repayments are also calculated and withheld on the banded scale that applies to their income.
5. Medicare levy (2%) is withheld in the same way as for regular pay.
The key point: you are handling the paperwork and payroll mechanics, but the underlying money comes from the government, not your own accounts.
Superannuation on Parental Leave Pay
Government-funded Parental Leave Pay does not attract the Superannuation Guarantee. You are not required to pay super on top of those government payments. From 2026, the Superannuation Guarantee sits at 12% of ordinary time earnings — but PLP is not classified as ordinary time earnings for this purpose.
This is a known gap in the scheme that has attracted policy debate. Some employers choose to pay super on parental leave voluntarily as part of their own leave policy. If you do this, those contributions come from your own funds, not from Services Australia.
Employer-funded top-ups
Many employers offer paid parental leave conditions above the government minimum — for example, 12 or 16 weeks at the employee's full base salary, running alongside or before the government payments. These top-up payments are entirely your cost and operate like ordinary salary:
- PAYG withholding applies at the employee's marginal rate
- The Medicare levy (2%) is withheld
- The Superannuation Guarantee applies if the top-up is classified as ordinary time earnings — which it generally will be if it replaces the employee's normal salary
- STP reporting is required at each pay event
Your employment contracts, enterprise agreements or HR policies define what you have committed to pay. Check them carefully before the employee goes on leave — obligations vary significantly between organisations.
Unpaid leave and National Employment Standards
Under the National Employment Standards, employees are entitled to up to 12 months of unpaid parental leave, with a right to request a further 12 months. This entitlement applies to full-time, part-time and, in many cases, casual employees who meet the service threshold.
During unpaid leave, your payroll obligations largely cease — no wages, no PAYG, no super on those periods. However, the employee's annual leave entitlement (4 weeks per year under the NES) does not accrue during unpaid parental leave unless your enterprise agreement or contract says otherwise.
You must keep the role open — or an equivalent role — and must not treat the return from parental leave as a redundancy trigger without proper process and entitlements, including the statutory redundancy-pay scale based on years of service.
Practical checklist for payroll teams
Before an employee's leave starts, work through these steps:
- Confirm whether Services Australia will channel payments through you or pay the employee directly
- Update the employee's pay record to reflect the correct payment type and rate
- Set PAYG withholding correctly — the employee may want to lodge a Withholding Declaration if their income changes
- Check whether your enterprise agreement or contract requires super on any top-up payments
- Plan STP reporting so each pay event is lodged on time, and finalise the payment summary by 14 July after the financial year ends
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