Paid Parental Leave: employer payroll steps

The employee claims Parental Leave Pay from Services Australia, not from you. Services Australia assesses the claim and decides whether your business has to deliver the payment. The scheme applies to employers of every size, and the employee can be full-time, part-time, casual, seasonal or on a contract. You don’t have to provide it to independent contractors, short-term employees or people who have stopped working for you.

Services Australia pays the employee directly instead when they aren’t eligible to get it through you or are already on an income support payment. If the employee splits their days into several blocks, you only provide the first continuous block (up to 26 weeks); Services Australia pays any later blocks itself.

If an employee doesn’t meet the employer determination criteria, you can still opt in to pay them through payroll if you both agree. You must opt in before the employee lodges their claim. See the employer’s role in the scheme.

The rate is based on the national minimum wage and usually changes each 1 July. It depends on the financial year in which the days are taken, not the child’s birth date, so a block that crosses 30 June can be paid at two rates. Every employee gets the same weekly amount regardless of their usual hours or salary. Services Australia shows the daily rate on each payment advice.

For partnered families some days are reserved for the other parent: 20 days for a child born or adopted from 1 July 2026. Current figures are on Services Australia’s how much you can get page.

1. Create an individual PRODA account, register the business in PRODA and link it to Business Hub. Payroll providers must register each ABN separately.
2. In Business Hub, apply for Paid Parental Leave Services for the legal entity.
3. When an Employer Determination letter arrives, complete the online acceptance notice with the employee’s pay cycle details and your business bank account. You don’t give Services Australia the employee’s bank details.
4. If you think the determination is wrong (for example, the employee hasn’t worked for you for 12 months or will leave before their pay period ends), contact Services Australia first, then lodge a decline with reasons and documents within the 14 days.

Services Australia then writes to confirm how long you must provide the payment and when the first funds will arrive. Steps are on how to respond to an Employer Determination.

• You never have to pay before the funds arrive, and you don’t need a separate bank account.
• Pay only the amount for the current pay period, plus any arrears. Arrears can be paid as a lump sum; future periods can’t. The employee can’t take the payment at half pay.
• The only deductions allowed are PAYG withholding, child support, automatic pay arrangements, garnishees and voluntary super contributions, including salary sacrifice.
• The payslip or notice must show your business name and ABN, the employee’s name, the period covered, the payment date, the gross amount, total PAYG withheld for the pay period, the net amount, and the amount and destination account of any other deduction.

See providing Parental Leave Pay for the full list.

• Tax: Parental Leave Pay is taxable. Withhold under normal PAYG arrangements and include it in the employee’s annual income totals.
• STP: the ATO’s Phase 2 guidelines list government paid parental leave under paid leave type P. Keeping in touch days the employee works are reported as gross, not as paid parental leave.
• Super: you don’t have to make super guarantee contributions on Parental Leave Pay. For children born or adopted from 1 July 2025 the ATO pays a Paid Parental Leave Superannuation Contribution straight to the employee’s fund after the financial year ends, starting in 2026–27. You can still make voluntary contributions.
• Payroll tax and workers compensation: Parental Leave Pay isn’t subject to payroll tax and creates no extra workers compensation premium liability. Keep it separate in your payroll system from amounts that do attract super, payroll tax or premiums.
• Your accounts: treat funds you hold as a liability until paid out. Declare the funds and any interest as assessable income; the amounts you pay and your administration costs are deductible.

The scheme creates no new leave entitlement. The employee’s leave from work is still governed by the National Employment Standards: 12 months of unpaid parental leave, with a request for up to 12 more. Parental Leave Pay can be received before, after or at the same time as other paid or unpaid leave.

If you pay a top-up, run it as a separate pay item. Employer-paid parental leave is also reported under paid leave type P. Whether super is payable on a top-up depends on the ATO’s ordinary time earnings rules and any award, agreement or policy term, so check before you set the pay item up. Use the payday super cost calculator to cost super on any wages you do pay.

• Report changes through Business Hub, including new bank details, selling or closing the business, or being unable to pay the employee.
• Some work on a Parental Leave Pay day is allowed, such as after a stillbirth or infant death, or when the baby stays in hospital and the parent returns 14 days or more after the birth. Tell Services Australia when it happens.
• Employees can refuse a request to come back to work during their leave.
• Save each payment advice: Business Hub Online Reports only hold them for 90 days.

Details are on telling us when circumstances change and reporting requirements.