Announcements
PUBLISHED 10 December 2001

Paid parental leave bill introduced

A bill bringing into effect the Government's recently announced paid parental leave scheme was introduced into Parliament today. For information on the Employment Protection (Paid Parental Leave) Amendment Bill see the Government's media release. For information on the tax aspects of the bill see our report Tax implications of bill.


Hon Laila Harre

Parental Leave and Employment Protection (Paid Parental Leave) Amendment Bill tabled

Hon Laila Harre has tabled the Parental Leave and Employment Protection (Paid Parental Leave) Amendment Bill for introduction to parliament this week.
The bill implements the government's decision to provide paid parental leave, and fine-tunes several details of the legislation that was announced in principle last month.

Laila Harre says the bill builds on the Parental Leave and Employment Protection Act of 1987.

"Women are increasingly providing a significant proportion of their family's income. They are also rearing the children who are the producers of the future, the children who ensure the continuity of our society," she said.

"Paid parental leave will reduce the financial pressures on these women and their families as they adjust to the birth of a child."

The bill provides a tax-funded payment of up to $325 a week (before tax) to new mothers who are eligible for leave under that Act. They will receive those payments for a continuous period of up to 12 weeks starting on the day they begin their maternity or paternity leave.

The new provisions will cover those whose baby is expected on after July 1 2002, or whose baby is born or adopted on or after July 1 2002 even if they started leave before July 1 2002 under the provisions of the principle Act.
Mothers can choose to transfer their entitlement, or part of it, to their spouse, providing he or she is also eligible for parental leave under the act.

"This bill updates New Zealand's provisions relating to parental leave and brings them into line with modern working conditions," Laila Harre said.

"Nineteen per cent of New Zealand firms already provide paid parental leave because they recognise the benefits it provides both for their employees and the business itself in terms of reduced turnover and better motivation of staff."

Other details of the bill include:

  • The payment is available in respect of any job from which the recipient is eligible for and has taken leave. If the recipient has taken parental leave from more than one job, the payment will replace the total income of all those jobs up to the $325 cap.
  • The maximum payment will be adjusted annually to maintain the relationship with average weekly earnings as measured by the Quarterly Employment Survey.
  • The eligibility criteria for parental leave under the principal Act will be amended to ensure that people who work atypical hours or with job-share, rostering or on-call arrangements are not disadvantaged. The current criteria require an employee to have worked for the same employer for a minimum of 12 months for at least 10 hours a week. Under the Bill the 10-hour threshold will be amended to require that the employee has worked at least an average of 10 hours a week.
  • People receiving parental leave payments will continue to have access to social assistance, including family assistance (except the Parental Tax Credit) provided under the Income Tax Act, and parental leave payments will be treated as income for abatement purposes.
  • The bill makes it clear that paid parental leave will not affect existing agreements privately negotiated between employers and employees.
  • Payments will be made fortnightly, and the payment will continue until the mother returns to work even where a baby is miscarried, dies or is given for adoption.
  • If the mother dies, or loses legal guardianship, a spouse who also meets the eligibility criteria for parental leave can succeed to the payment.
  • The definition of an "employee" in the principal Act is extended to cover homeworkers. This will bring the Parental Leave and Employment Protection Act into line with the Employment Relations Act, the Minimum Wage Act and the Holidays Act.
  • The bill extends the definition of spouse to include same sex partners. This is consistent with the Human Rights Act definition.
  • In adoption situations where the physical recovery of the mother is not an issue, eligible parents who are jointly adopting a child under five years may nominate either parent as the spouse who will be primarily entitled to the paid parental leave payment.

After its first reading the bill will be referred to the Transport and Industrial Relations Select Committee.


Report from the Policy Advice Division

Tax implications of the Parental Leave and Employment Protection (Paid Parental Leave) Amendment Bill

The Parental Leave and Employment Protection (Paid Parental Leave) Amendment Bill includes a number of proposed amendments to the Income Tax Act 1994 relating to the tax treatment of the Government's paid parental leave and the eligibility of recipients to financial assistance provided through the income tax system.

Payments of paid parental leave to be taxable

The Government's paid parental leave scheme is intended to replace a proportion of the employee's income from employment for which they take parental leave. Consequently, paid parental leave will be treated as gross income and will be subject to deductions for PAYE income tax, student loan repayments and child support. It will not, however, be subject to ACC levies. The bill therefore includes amendments to the definitions in the Income Tax Act 1994 of "salary and wages" and "gross income".

Financial assistance under the income tax system

Parents receiving paid parental leave will retain access to financial assistance provided under the Income Tax Act. Parental leave payments will not prevent a person from receiving the family assistance tax credits (other than the parental tax credit) under Part KD of the Income Tax Act 1994 or the transitional tax allowance in section KC 3. Paid parental leave will be treated as income for the purposes of abating these payments. Consequently, the bill proposes amendments to section KC 3 and to the definition of full-time earner in section OB1.

The parental tax credit

The parental tax credit is a credit of tax to provide support for working families with a newborn child, under part KD of the Income Tax Act. Parents will not be able to receive both the Government's paid parental leave and the parental tax credit, but will be able to chose the more beneficial entitlement. Consequently, the bill proposes an amendment to the Income Tax Act to provide that people will not be eligible for the parental tax credit if they have received paid parental leave in respect of that child. A corresponding amendment is proposed to the Parental Leave and Employment Protection Act to provide that a person loses their entitlement to paid parental leave if either they or their spouse have received the parental tax credit for that child. However, a person who chooses to receive the parental tax credit may, during the period of parental leave, receive paid parental leave by offsetting the full amount of parental tax credit received against their entitlement to paid parental leave.