Paid Parental Leave (PPL) or Maternity Leave is paid by the Government for the employer to pay the employee.
It runs for 18 weeks
The rate is paid at the National minimum wage. For more information see Paid Parental Leave for employers.
The employee applies directly to Centrelink to receive PPL 3 months before it is required and awaits approval. Employee must supply written notice to the employer, that they are applying. Centrelink contacts teh employer if successful and the employer also registers online with Centrelink to receive the payments.
Once they’re assessed as eligible, the employer receives a letter – you follow the instructions to accept the role of administering the payments.
Centrelink will pay the employer the money and you pay it on to the employee – the payments are subject to PAYG, so it is raised through payroll. BUT NO Super or Annual or Personal Leave or State Payroll Tax are raised or accrued. PPL is not included in Workcover wages for insurance either.
Centrelink will prepay, so you don’t need to make any payments until you receive the money – there is usually a delay between when the employee becomes eligible/applies and when Centrelink starts paying money, so the first payment will often be large and include a back payment.
The main thing you need to do is keep track of what you get paid and when, and what you pay out as wages – you’ll get a remittance letter for each payment, showing the period it’s covers.
Update on Instructions (further below now does not work in XERO anymore)
June 2020 – PPL set up in Xero
We need to set up 2 new accounts, a new pay item, add the item top the employee card
2 new Accounts > Accounts > Chart of Accounts – create 2 new accounts – (so you can track if all is paid out correctly when both are the same balance on the Profit and Loss over the 18 weeks) – look at your Chart of Accounts and work out what number to use –
1 new Revenue Account “Paid Parental Leave Subsidy” (to allocate the Government income)
3 New Expense Account “Paid Parental Leave Wages”
Pay Item > Business name top left > Settings > Payroll Settings > Pay Items, create a new Item – “Parental Leave” > Rate Type, Fixed Amount > Amount $PPL current rate > Expense account just created >Exempt from Super G, > Reportable as W1
Employee card – Payroll > Employees > open employee having PPL >
Leave Tab > Click the leave hours, to open > Leave Calculation Method – drop down and select NO Calculation Required > Save
Pay Template > Zero out the regular Ordinary hours
Add Earnings Line > select the new PPL item > Calculation Type “Use Earnings Rate” (expense account should show the new PPL expense account from the item set up)
SAVE at the bottom
Pay Employees – Remove hours on the Ordinary line (if not zeroed in card), as only the PPL will be paid while the employee is on leave, complete payrun and post. File for STP.
Below is out of date with Xero software changes, does not work any more to attach a Liability account 😦
The payments need to be treated as a liability, not income and expense, as they “reimburse” you for what was paid to the employee.
Therefore, the set-up in your accounts requires:
- A Liability Account eg “806 Paid Parental Leave Liability” – but – see special note below, you start it as an EXPENSE type **
- A Pay Item “Paid Parental Leave” – linked to the 806 as an expense account (to start) that is subject to PAYG, Exempt from super, Reportable at W1
You can’t directly allocate a Pay Item to a Liability account – so see detail of a work-around to achieve this**
**To get a liability account attached to a Pay Item – follow in THIS order:
- FIRST create a PPL expense account say: “806 Paid Parental Leave” (ignore the usual expense account numbering)
- (click Accounts > Chart of Accounts > Add Account)
- SECOND create the Pay Item “Paid Parental Leave Pay” and link to the expense 806 PPL
- exempt from Super and Reportable as W1, save;
- (click business name top left > Settings > Payroll settings > Pay Items tab > Add)
- THIRD go back in the Chart of Accounts change 806 PPL type to Current LIABILITY.
The 2 main transactions are:
- Deposit on bank – Receive the Centrelink payment – (Receive Money in the transaction background: DR Bank Account CR 806 PPL Liability)
- Pay-run – Wages paying employee – and allocate the Gross to the Paid PL item (this allocates as CR Bank Account DR 465 PPL Liab (happens in the background)) watch the tax if you pay several periods in one go – apportion PAYG as a % appropriate to the Tax tables).
When you complete a pay-run, the wage will automatically be offset against the Centrelink Liability account to help you keep track
Centrelink have a very comprehensive Employer guide to PPL available here: https://www.humanservices.gov.au/organisations/business/services/centrelink/paid-parental-leave-scheme-employers. (and employee info is at Parental Leave Pay)
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