Effective from 1 July 2026, the Australian Government’s Paid Parental Leave (PPL) scheme has reached its final planned length of 26 weeks. These changes have no effect on direct wage costs for Australian Small to Medium Enterprises (SMEs), as the entitlement remains government funded. However,the expansion requires businesses to update their approach to workforce planning, payroll administration and leave management. Below are the key legislative changes now in effect and administrative changes needed to remain in compliance.
1. The Expansion to 26 Weeks (130 Days)
For children born or adopted on or after 1 July 2026, eligible families can receive up to 26 weeks of Paid Parental Leave.
This entitlement is paid based on the National Minimum Wage, which equates to $1,004.70 per week before tax for the 2026–27 financial year. While the government funds the payment, eligible employers may be required to administer these payments through their standard payroll cycle, based on an Employer Determination issued by Services Australia (generally applying to employees with at least 12 months’ continuous service who intend to return to work after their leave).
To qualify, the employee must meet the Services Australia (Centrelink) work and income tests. For the 2026–27 financial year, the income limits are $186,487 for an individual or $386,525 for a combined family income.
2. Reserved Days and Concurrent Leave
The emphasis is on shared parenting/flexibility instead of traditional “primary” and “secondary” carer labels.
- The “Use It or Lose It” Rule: Where there are two eligible parents, 4 weeks (20 days) of the 26-week entitlement are strictly reserved for each parent. This operates on a “use it or lose it” basis. If one parent does not take their reserved 20 days, those days cannot be transferred, and the family forfeits that portion of the leave. Single parents are exempt and can access the full 26-week entitlement themselves.
- Concurrent Leave Adjustments: Eligible parents can now take up to 4 weeks (20 days) of their Paid Parental Leave at the same time. For employers, this may mean processing Paid Parental Leave across multiple payroll cycles as employees may choose to take their entitlement in different leave blocks during the eligible period.
3. Superannuation on Paid Parental Leave
A major policy change introduced in 2025–26 continues to apply. For babies born or adopted on or after 1 July 2025, superannuation is paid on government-funded Paid Parental Leave.
Employers should understand how this payment works. You are not required to calculate or pay this 12% superannuation contribution out of your own business cash flow. The Australian Taxation Office (ATO) manages this process directly, depositing the contribution directly into the employee’s nominated super fund after the relevant financial year ends.
Employers should continue maintaining accurate payroll and STP records, as these support broader payroll reporting obligations. The ATO relies entirely on your STP data to verify the exact amount of Paid Parental Leave administered to each employee so they can calculate the superannuation correctly.
4. Administering Flexible Leave Blocks
Employees can take their 130 days in a highly flexible manner. Leave no longer needs to be taken in a single continuous block. Employees can choose to take their leave as:
- A single continuous block.
- Multiple smaller blocks.
- Single days (for example, working three days a week and taking two days of PPL to transition back into the workforce).
This flexibility requires precise payroll mapping. When an employee returns to work part-time while drawing down single days of government PPL, your payroll system must separate standard ordinary hours from government-funded hours. Implementing structured payroll outsourcing ensures these fragmented payment schedules are administered correctly, avoiding accidental underpayments or STP reporting errors.
5. Interaction with Employer-Funded Leave
The government PPL scheme works in conjunction with existing workplace entitlements.
Businesses should maintain accurate financial records to reconcile government-funded payments with payroll transactions. This helps to reconcile government funds received by the business with payroll disbursements, so your company has clear tax and reporting obligations.
When a business offers a “top-up” (paying the difference between the government minimum wage and the employee’s standard salary), businesses should maintain a clear separation of government-funded and employer-funded payments. Utilising professional outsourced bookkeeping services helps maintain precise ledger integrity.
Managing Your Workforce Planning: Final Thoughts
The 26 weeks of Paid Parental Leave is a major shift for Australian employers and employees alike. While the Government funds the entitlement, businesses must still administer payments correctly, maintain accurate payroll records and manage longer and flexible leave arrangements. Reviewing payroll systems, updating internal leave policies and knowing current legislative requirements will keep businesses compliant while supporting employees during parental leave.
Government-funded Paid Parental Leave and employer-funded leave should be recorded separately for payroll and accounting purposes. For businesses reviewing their year-end financial processes, check out How to Prepare Your Books for EOFY which is useful for keeping payroll, reconciliations and financial records organised.
How Befree Can Help
Implementing a new payroll system is only the beginning. Payroll software still needs to be configured correctly for Ordinary Time Earnings (OTE), STP reporting, SuperStream processing and employee superannuation data. Ongoing administration is equally important to ensure every pay run is processed accurately and compliance obligations continue to be met. Whether you’re upgrading your existing platform or adapting to Payday Super requirements, Befree’s payroll specialists help businesses manage payroll administration with confidence. Contact our team to discuss the right support for your payroll operations.
FAQs
1. What happens if my partner doesn’t want to (or can't) take their "reserved" days?
In a two-parent family, the total 26 weeks of Paid Parental Leave includes 4 weeks (20 days) reserved for each parent. These reserved weeks operate on a “use it or lose it” basis to encourage shared caregiving. If one parent does not use their reserved 20 days or is ineligible to claim them (for example, because they do not meet the work test), those days cannot be transferred to the other parent. As a result, the family may receive only 22 weeks of Paid Parental Leave instead of the full 26 weeks. Single parents are exempt from this rule and can access the full 26 weeks themselves.
2. Can both parents take government Paid Parental Leave at the same time?
Yes. The rules taking effect in July 2026 allow parents to take up to 4 weeks (20 days) of their government-funded PPL concurrently. This means both parents can be at home together receiving the government payment at the same time, which is particularly helpful in the immediate weeks following a birth or adoption.
3. Can I get the government PPL at the same time as my employer’s paid maternity/paternity leave?
Yes, you can “receive both payments” (or “stack”) your leave. The government scheme operates independently of your workplace entitlements. If your employer offers 12 weeks of fully paid parental leave, you are legally entitled to receive that alongside the government’s PPL. You can choose to take them concurrently (receiving both payments at the same time to boost your income) or consecutively (taking your employer leave first, then starting the government leave to maximise your total time at home).
4. Do I get superannuation paid on my 26 weeks of PPL?
Yes, but it is paid by the government, not your employer. For babies born or adopted on or after 1 July 2025, the Australian Government pays a 12% superannuation contribution on the government-funded Paid Parental Leave. This money will not appear in your regular weekly pay packet. Instead, the ATO will calculate the total amount owed at the end of the financial year and deposit it directly into your nominated superannuation fund as an annual lump sum.
5. Does my employer have the right to refuse my request to take Paid Parental Leave?
If you are requesting unpaid parental leave under the National Employment Standards (NES) to facilitate your government PPL, your employer can refuse only in limited circumstances permitted under the Fair Work Act. You are legally entitled to up to 12 months of unpaid parental leave (with the right to request a further 12 months) provided you have completed 12 months of continuous service. Recent amendments to the Fair Work Act explicitly prohibit employers from refusing or unreasonably delaying approved parental leave.