Definition of ‘surrogacy leave’
- The Payroll Tax Act defines ‘surrogacy leave’ as leave given to an employee in connection with a child residing with the employee under a surrogacy arrangement, other than annual leave, recreation leave, sick leave or similar leave.4
- ‘Surrogacy arrangement’ is defined as having the meaning given by the Surrogacy Act 2010 (the Surrogacy Act).5
- Under s.7(1) of the Surrogacy Act, a surrogacy arrangement means an arrangement, agreement or understanding between a woman and another person or persons under which:
- the woman agrees to become, or try to become, pregnant with the intention that
- a child born as a result of the pregnancy is to be treated as the child, not of the woman, but of the other person or persons
and
- the woman will relinquish to the other person or persons custody and guardianship of a child born as a result of the pregnancy
and
- the other person or persons agree to become permanently responsible for the custody and guardianship of a child born as a result of the pregnancy.
- Section 56 of the Surrogacy Act makes it an offence to enter into a ‘commercial surrogacy arrangement’. Section 10 of the Surrogacy Act provides that a surrogacy arrangement is a commercial surrogacy arrangement if a person receives a payment, reward or other material benefit or advantage (other than the reimbursement of the birth mother’s surrogacy costs) for the person or another person:
- agreeing to enter into or entering into the surrogacy arrangement
- permanently relinquishing to one or more intended parents the custody and guardianship of a child born as a result of the surrogacy arrangement
or
- consenting to the making of a parentage order for a child born as a result of the surrogacy arrangement.
When the leave may be taken
- The exemption is not affected by whether the surrogacy leave is taken before or after the child starts residing with the employee, provided the leave is in connection with the child residing with the employee.6
Example 1
A child begins residing with Julie under a surrogacy arrangement on 1 February 2011. Julie takes 14 weeks’ surrogacy leave, commencing two weeks prior to 1 February 2011, and extending 12 weeks after that date. The two weeks before 1 February 2011 are spent making arrangements for the child’s arrival. The wages paid to Julie for the full 14 weeks’ surrogacy leave are exempt.
Types of wages that are exempt
- Exempt wages include wages, salaries, employer superannuation contributions, allowances, bonuses and commissions. Fringe benefits provided to an employee on surrogacy leave are not exempt.6
- Wages paid or payable to an employee for annual leave, recreation leave, sick leave or similar leave that is not surrogacy leave, even if taken in connection with a child residing with the employee under a surrogacy arrangement, are not exempt.8
Example 2
A child commences residing with Michael under a surrogacy arrangement. Michael’s employer provides 12 weeks’ paid surrogacy leave. Michael also takes an additional three weeks’ annual leave and four weeks’ long service leave consecutively with the surrogacy leave, in connection with the child starting to reside with him. The wages paid to Michael for the 12 weeks’ surrogacy leave are exempt. The wages paid to him for the remaining seven week leave period are taxable.
Record keeping
- To claim the exemption in relation to surrogacy leave, an employer must obtain and keep as a record a statutory declaration from the employee stating that a child has started residing with the employee under a surrogacy arrangement.
- The employer must keep the records substantiating a claim for the exemption for wages paid or payable to an employee on surrogacy leave for five years.9