Budget 2014: Government commits to paid parental leave scheme

The government reinforced its commitment to Tony Abbott’s paid parental leave scheme in tonight’s budget, with Treasurer Joe Hockey saying in his budget speech the program will “help keep mothers engaged with the workforce”.

The government said the scheme will come into effect on July 1, 2015 and will be capped at a lower threshold of $100,000 per year, as indicated by Prime Minister Tony Abbott before the budget.

As expected, the scheme will also include superannuation.

In a statement accompanying the budget papers, the government said the scheme “will support mothers to remain engaged with their employer and help address the disparity between the average retirement incomes of men and women”.

However, provisions for the revised policy as well as the slated 1.5% cut to company tax expected to be introduced to pay for the scheme were not included in the budget papers.

In its original form, the scheme was to be capped at $150,000 per year and it was expected to take a $5.5 billion chunk out of the government’s coffers each year.

The controversial policy has not been without its critics, with members of the Coalition signalling their unease over the policy to the media in recent weeks and the Greens raising concerns about the cost of the policy in light of the government’s plans to cut welfare payments in the budgets.

As previously reported by SmartCompany, the scaled-back scheme will not introduce a means-test for the scheme, instead capping the amount of money women can receive at a lower level.

The scheme will continue to pay six months or 26 weeks parental leave based on the recipient’s full-time salary, but the maximum payouts from the scheme will now be capped at $50,000 instead of $75,000.

Diversity strategy and compliance consultant Prue Gilbert previously told SmartCompany that less than 2% of Australian women of childbearing age earn above $100,000 and so the change would only affect a small percentage of workers.

“It’s a pretty minimal change and is more symbolic than anything else,” said Gilbert before the budget.

Gilbert said the change was “aimed at getting more support” for the scheme. “The Greens have previously said that they will support the scheme at $100,000,” said Gilbert, who believes the change will mean the scheme will almost certainly gain the Senate’s tick of approval.