Having a baby while you run the business: your parental leave cash plan

Employees get a letter from HR. Business owners get a much bigger question: if I step away for a few months, what happens to the business, and to the money?

The short answer is that you can take parental leave as an owner, and plenty do. It just takes more planning than it does for an employee. Start around six months out. Decide who’ll run things, work out how far takings could fall while you’re away, and put a cash buffer in place to cover that gap plus any tax already owed. Parental Leave Pay can help, but it’s not designed to replace business profit, and there’s a catch for self-employed parents that’s easy to miss.

This guide walks you through it like a coaching session: a few honest questions, one simple sum and a timeline you can stick on the fridge.

Can a business owner actually get Parental Leave Pay?

Yes. Services Australia says self-employed people and sole traders can get Parental Leave Pay if they meet the eligibility rules. The big ones for owners are:

• The work test. You need to have worked in 10 of the 13 months before the birth or adoption, with at least 330 hours across those 10 months. Self-employed hours count. Services Australia’s work requirements page explains the detail, including the limit on gaps between working days.
• The income test. There’s an individual income limit, with a family income alternative if you don’t meet it. Check the current figures before you plan around the payment.
• No working on paid days. This is the catch. Services Australia says that if you’re self-employed, you must not work on any day you choose to get Parental Leave Pay.

That last rule is the one that trips owners up. Many of us assume we’ll “just keep an eye on things” from home. Answering customer emails, quoting jobs or doing the books on a paid day can count as work. So the real question isn’t whether you can claim. It’s who does those jobs on the days you’re off?

How much leave does the scheme provide now?

For children born or adopted from 1 July 2026, the scheme provides 130 days of Parental Leave Pay, or 26 weeks on a five-day week. It’s paid at the national minimum wage rate, before tax, and the days can be shared between eligible parents.

There’s also a super top-up now. For children born or adopted from 1 July 2025, the ATO pays a 12% super contribution on Parental Leave Pay. It’s paid once a year after the financial year ends, so it’s good news for your retirement savings but it doesn’t help cash flow during your leave.

Coaching question 1: who runs the business while you’re away?

Before you touch a spreadsheet, be honest about how the business runs today. Score yourself on these five questions: 2 for yes, 1 for partly, 0 for no.

#	Self-test	Score
1	Could someone else open up, serve customers or do the work without calling you?
2	Could someone else quote, invoice and chase payments?
3	Is your bookkeeping up to date, with BAS handled by a bookkeeper or accountant?
4	Do your key suppliers and customers know who to contact when you’re away?
5	Have you got at least one person who can approve payments or sign off on urgent decisions?

8–10: You’re in good shape. Your plan is mostly about cash. 4–7: You’ve got some cover, but there are gaps. Fill them now, while you have time to train someone. 0–3: The business runs through you. You’ll need either paid cover or a planned slowdown, and both affect cash.

Common ways owners fill the gap:

• Promote or upskill a team member and pay them more for the period.
• Bring in a temporary manager or contractor. If you’re taking someone on, our hiring staff page covers how owners fund the wage gap before a new person pays their way.
• Have your partner or a family member step in, with a clear list of what they can and can’t decide.
• Deliberately trade lighter. Take fewer jobs, pause a product line or shorten hours. Less income, but also less stress.

Coaching question 2: how big is your cash gap?

Now the numbers. You’re working out the difference between what the business normally brings in and what it will bring in while you’re away, after the costs of cover.

Here’s the sum:

1. Expected weekly drop in gross profit. If takings fall, how much less gross profit is that each week? Use gross profit, not sales, because your cost of goods falls too.
2. Plus the weekly cost of cover. Extra wages, a contractor or a manager’s top-up.
3. Minus any Parental Leave Pay you’ll put back into the household budget so you can draw less from the business.
4. Multiply by the weeks you’ll be away. Then add a few weeks for the ramp-up when you come back, because trade rarely snaps back on day one.
5. Add tax and big bills that fall due in that window. BAS, PAYG instalments, insurance renewals, registrations. The ATO’s BAS due dates don’t pause for a newborn.

That final figure is your cash gap. Compare it with your current buffer. Our cash runway guide shows you how to measure the buffer you’ve really got, after setting aside tax that’s already owed.

If you employ staff, remember that super now has to be paid with wages under Payday Super, which started on 1 July 2026. Wages and super leave together, every pay run, whether you’re there or not.

Worried the gap is bigger than your buffer? It’s worth seeing what funding fits your situation while you’re still trading at full strength. There’s no credit check when you first enquire.

Illustrative example: a mobile dog groomer planning 20 weeks off

Illustrative only. Not a real client.

Sam runs a two-van mobile dog grooming business in Geelong. Sam does most of the grooming in one van, and a full-time employee runs the other. Sam is planning 20 weeks off when the baby arrives in March.

Cover. Sam’s self-test score is 5. The employee can groom but has never done the bookings or the books. Sam decides to hire a casual groomer for the second van and pay the employee extra to manage bookings. The bookkeeper takes over BAS.

The gap. Sam’s van brings in around $2,600 a week in gross profit. The casual groomer is expected to keep about half of that going, so the drop is around $1,300 a week. The employee’s top-up and extra super adds about $250 a week. Sam’s household will lean on Parental Leave Pay, which means Sam can take about $600 a week less from the business.

$1,300 + $250 − $600 = $950 a week.

Over 20 weeks plus four weeks of ramp-up, that’s about $22,800. Add a BAS payment of roughly $9,000 due in that window, and Sam’s cash gap is about $31,800.

The buffer. Sam has $14,000 spare after setting aside tax already owed. The shortfall is about $17,800.

What Sam does. Sam trims the gap by booking a run of regular clients for the month before the baby is due and putting a planned van service off until spring. Then Sam arranges a modest line of credit as a standby, sized to cover the rest with some room to spare. The plan is to draw on it only if bookings come in under target. Sam sets it up in November, while recent bank statements show a full year of normal trading.

The lesson isn’t “borrow for parental leave”. It’s that Sam knew the number, cut it where possible, and only then decided what kind of buffer made sense.

Coaching question 3: buffer, funding, or both?

Once you know your gap, there are three honest options:

• Save it. If you have six months or more to go and the gap is modest, setting aside a fixed amount each week can cover it. Simple, and no repayments while you’re away.
• Arrange a standby facility. A business line of credit suits owners who might need cash but don’t know how much. You draw only what you use and you’re typically charged on what you’ve drawn.
• Borrow for a specific purpose before you go. Sometimes the leave is the moment to fix something: replace the van that keeps breaking down, or fund a hire who’ll stay on after you return. Our cash flow gap page walks through which option suits which kind of gap.

A gentle warning from experience: try not to make borrowing decisions in the first few weeks with a newborn. Get the plan settled while you’re well rested and can talk through the details yourself.

Your parental leave countdown

When	What to do
6 months out	Run the self-test. Choose your cover. Start training or recruiting.
5 months out	Calculate your cash gap. Check which BAS, PAYG and insurance dates fall in your leave.
4 months out	Decide: save, standby facility or specific borrowing. If you’ll need funding, start the conversation now.
3 months out	Check your eligibility for Parental Leave Pay and get your paperwork in order.
2 months out	Hand over bookings, invoicing and supplier contacts. Run a trial week with you hands-off.
1 month out	Tell key customers and suppliers who to contact. Set up payment approvals for your stand-in.
Back at work	Expect a ramp-up. Keep the buffer in place until takings are back to normal.

What about future loan applications?

A few lighter months on your bank statements will show if you apply for finance later. That’s normal, and it doesn’t have to count against you. When you next apply, a sentence or two explaining the dip (“I took 20 weeks of parental leave from March; takings recovered by September”) does a lot of work. Our guide to explaining your business to a lender shows you how to put that in a few clear sentences.

Planning for a new arrival? See what support fits before you step back

You’re about to take on the biggest job of your life, and the business still needs to run while you do it. The owners who handle this best don’t wing it. They work out their gap early and line up a buffer while they’ve got the time and headspace to choose well.

If your sums show a gap you’d like to cover, we can help you see your options. Our enquiry takes about 60 seconds, and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders, so you won’t be fielding calls from strangers while you’re trying to get the cot assembled. A real person reads your answers, looks at your business and your timing, and calls you to talk it through.

Please fill the form in accurately: what the money’s for, roughly how much you need, your monthly deposits and when you’re planning to step back. It helps us match you with the right option first time. Want to explore first? Our 2-minute funding profile ranks your options and shows you what to get ready.

See if you qualify →