You have financial reporting and taxation obligations when it comes to administering Parental Leave Pay.
Your financial statements
In accordance with Australian Accounting Standards, Paid Parental Leave funds you receive from us must be treated as a liability until you have provided Parental Leave Pay to your employee.
You shouldn’t account for Paid Parental Leave funds as revenue or an expense. However, you do need to include the cash receipts and cash payments in your statement of cash flows.
Read more about accounting standards and financial statements, on the Australian Accounting Standards Board website or talk to your accountant.
Your business’s tax return
In your business’s tax return, you need to declare the following as assessable income:
- Paid Parental Leave funds you have received from us, and
- any interest you have earned on Paid Parental Leave funds
You may claim a tax deduction for:
- the amount of Parental Leave Pay you have provided to your employees, and
- costs you have incurred in administering the scheme
You’ll need to keep a record of the Paid Parental Leave funds received and the Parental Leave Pay amount paid throughout the financial year for your tax return.
Read more about completing your tax return, on the Australian Taxation Office website or speak to your accountant.
Payroll tax is managed differently in every state and territory. Parental Leave Pay isn’t subject to payroll tax and will need to be identified separately from other amounts that attract payroll tax in your account system and reports, such as superannuation and workers compensation premiums.
Read more about payroll tax on the Department of Industry Business website.
You aren’t required to make superannuation guarantee contributions in respect to Parental Leave Pay, although you may make voluntary contributions.
You must identify Parental Leave Pay separately in your payroll system from other amounts that attract a superannuation guarantee liability.
Workers compensation premiums
The Paid Parental Leave scheme doesn’t give rise to additional workers compensation premium liabilities. Parental Leave Pay will need to be identified separately from other amounts that attract a workers compensation premium liability in your accounting system and reports.
Read more about workers compensation on the Department of Industry Business website.
You need to keep records of funds received from us and Parental Leave Pay provided to your employees. You must keep records that specify:
- the payment advice we provide whenever we transfer funds to you, and
- records of written notifications you have provided to your employee; for example, pay slips or separate notices
Read more about record keeping on the Fair Work Ombudsman website.