Exempt leave for payroll tax
Some parts of your employees' paid leave are exempt from payroll tax. Exempt leave includes:
- volunteer worker
- Other types of leave are taxable (e.g. recreation, sick, annual and long service leave).
- The subsidy component of the Australian Government JobKeeper payment is not taxable for payroll tax.
Parental, adoption and surrogacy leave
The amount of exempt leave depends on whether the employee is full-time or part-time.
- Full-time employees – the exemption is limited to wages to a maximum of 14 weeks. The leave may also be taken over more than 14 weeks at a reduced rate of pay per week.
- Part-time employees – if the leave is taken
- before 16 April 2011, the exemption is limited to a maximum of 14 weeks at the part-time rate of pay
- from 16 April 2011, the exemption includes leave taken over a longer period for wages equivalent to 14 weeks at the part-time rate of pay.
Parental leave (maternity and paternity) must be in connection with a pregnancy and can be taken before or after the child's birth.
Keep records of:
- medical certificates
- statutory declarations relating to the pregnancy or date of birth.
Adoption leave can be taken before or after the adoption.
Keep a record of the employee's statutory declaration that the child has been placed in their custody and that an adoption order has been made (or is coming).
Surrogacy leave can be taken before or after the child starts living with the employee under a surrogacy arrangement.
Keep a record of the employee's statutory declaration that the child is living with them under a surrogacy arrangement.
An exemption applies to wages you pay an employee who is on leave volunteering for:
- fire-fighting activities in a rural fire brigade, including training and prevention procedures under the Fire and Rescue Service Act 1990
- the State Emergency Service, or another emergency service unit under the Disaster Management Act 2003
- functions as an honorary ambulance officer under the Ambulance Service Act 1991.
Australian Defence Force
Wages you pay an employee who is on leave to serve in the Australian Defence Force are exempt.
- Learn more from the public ruling on exemption for parental and adoption leave pay (PTA012).
- Read the public ruling on exemption for surrogacy leave pay (PTAQ014A.1).
- Find out how the exemption is calculated in the public ruling for parental, adoption or surrogacy leave pay (PTAQ014A.2).
- Read the Surrogacy Act 2010.
- Learn about exemptions for contractors and employment agents.