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.

By InvestSMART · 8 May 2013

By InvestSMART ·
8 May 2013

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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.

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Frequently Asked Questions about this Article…

What is the Coalition's proposed paid parental leave scheme and who would qualify?

The Coalition proposes six months' full pay plus superannuation for new mothers earning up to $150,000 a year. The policy is intended as a universal paid parental leave offer for eligible primary carers within that income cap.

How would the Coalition plan to fund the paid parental leave scheme and which companies would pay the levy?

The Coalition would fund the scheme with a 1.5 per cent levy on companies with taxable incomes above $5 million. The Council of Small Business of Australia says that levy would fall on roughly 3,200 of the biggest companies.

What concerns have small business groups raised about the 1.5% levy?

The Council of Small Business of Australia argues the policy should be funded from consolidated revenue, not a levy. While 99 per cent of small businesses won't pay the levy, the council worries family businesses with high turnover could still be required to fund benefits for high‑income individuals.

How big is the estimated cost of the paid parental leave scheme and what fiscal questions does it raise?

The council noted the scheme was estimated at more than $3 billion at the last election and raised the question of where it fits fiscally given the budget deficit. The council's view is that paid parental leave may be better funded from general revenue because everyone benefits.

How have major business groups reacted to the Coalition's paid parental leave proposal?

The Business Council of Australia declined to comment on whether the proposed scheme would be modified. Previously it said an argument that some businesses could be better off (because they would no longer fund their own schemes) 'did seem to stack up' when compared with the cost equivalent of a 1.5 percentage point increase in the company tax rate.

How does the Coalition's paid parental leave plan compare with Labor and the Greens' proposals?

Labor's scheme offers 18 weeks' leave at the minimum wage for primary carers earning up to $150,000. The Greens propose six months' payment at the minimum wage plus super. The Coalition's plan differs by offering six months' full pay plus super for eligible mothers up to the $150,000 income cap.

What potential benefits do supporters say the Coalition scheme could deliver for businesses and the workforce?

Shadow treasurer Joe Hockey said the scheme would deliver a 'massive benefit' to small business, boost female participation in the workforce and lift productivity. The Council also praised that the policy could help narrow the gap in paid parental leave offerings between small and large businesses and that small businesses would not be required to distribute payments.

What should everyday investors watch for if the paid parental leave levy is implemented?

Investors should monitor potential cost impacts on large companies (those with taxable income above $5 million) since the 1.5 per cent levy would effectively increase employer costs. Watch commentary from peak groups, fiscal estimates (the scheme was previously costed at more than $3 billion) and any comparison to changes in the company tax burden, because these factors could influence corporate profitability and sector sentiment.