Prime Minister Tony Abbott believes it is fair to end the "double dipping" by new parents who get paid parental leave from the federal government and their employer.
If the employer doesn't offer a parental leave scheme, or it is not very generous and needs topping up, there is the government's scheme.
But new parents can't have both in full, Mr Abbott says.
"I put it to the crossbench in the Senate and the Labor Party, if you are serious about fairness you should support this change," he told reporters in Sydney on Sunday.
Treasurer Joe Hockey said closing the loophole would save the government nearly $1 billion over four years.
Opposition families spokeswoman Jenny Macklin said the government ditched its "gold-plated" scheme earlier this year and was confusing and stressing families with its changing positions.
"The one thing that parents know from Tony Abbott and Joe Hockey is that you would never believe anything they say about paid parental leave," she told reporters in Melbourne.
Early Childhood Australia chief executive Samantha Page said parents weren't ripping off the system by using both schemes to optimise the time they could have with their new baby.
"I think what many families were doing was combining maybe four to six weeks of employer-paid paid parental leave with government-paid parental leave in order to give themselves really substantial time at home with a new baby," she told ABC TV.
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