Small business critical of Abbott maternity pay

The Council of Small Business of Australia has criticised the Coalition's proposed paid parental leave scheme despite its members largely escaping the burden of funding it.

The Coalition has proposed six months' full pay plus superannuation for new mothers earning up to $150,000 a year, funded by a 1.5 per cent levy on companies with taxable incomes above $5 million.

Following criticisms of the scheme by Liberal MPs, shadow treasurer Joe Hockey this week said it would deliver a "massive benefit" to small business, as well as boost female participation in the workforce and lift productivity.

But the council's chief executive, Peter Strong, said the policy should be funded by consolidated revenue rather than a levy on 3200 of the biggest companies.

"Paid parental leave should come out of general revenue because everyone benefits from it," Mr Strong said.

And he questioned the cost - more than $3 billion at the last election. "The question is, where does it fit fiscally? With the budget deficit the way it is, it is a lot of money."

Mr Strong said that although "99 per cent of small business won't be paying tax into the scheme", the council worried that family businesses with high turnover would be required to pay benefits for high-income individuals.

But he praised the policy for helping to narrow the gap between the paid parental leave offerings of small business and large business, and not requiring small business to distribute payments.

The Business Council of Australia, whose members are the CEOs of Australia's biggest companies, declined to comment on whether it expected the Coalition's proposed scheme to be modified. But last month it rejected Opposition Leader Tony Abbott's contention that some businesses would be better off because they would not have to fund their own schemes, saying this did "seem to stack up compared to the cost of what is in effect a 1.5 percentage point increase in the company tax rate."

Labor's scheme, Australia's first universal paid parental leave, provides 18 weeks' leave at minimum wage and is available to primary carers earning up to $150,000.

The Greens have proposed six months' payment at the minimum wage, plus super.