Having a baby is a big change for any family, but taking parental leave can be a little more complicated when you run your own business. Unlike an employee, there is no employer to hand your work over to while you take time off.
The good news is that sole traders can still be eligible for Centrelink Parental Leave Pay, provided they meet the eligibility requirements.
Can a sole trader receive Parental Leave Pay?
Yes. Being self-employed or operating as a sole trader does not automatically exclude you from Parental Leave Pay.
You generally need to meet three key tests:
- Work test: You must have worked for at least 10 of the 13 months before your baby’s birth and completed at least 330 hours during that period, with no more than a 12-week gap between work days.
- Income test: For the 2025–26 financial year, your individual adjusted taxable income must generally be $186,487 or less. A family income test may apply if you don’t meet the individual income test.
- Residence requirements: You must meet the relevant Australian residence requirements.
For a sole trader, work can include carrying on your business for financial gain or benefit, even if the business isn’t making a profit.
It’s important to plan ahead. Keep records of the work you have performed and consider checking your eligibility well before your due date.
You should also remember that you generally can’t work on days for which you receive Parental Leave Pay, except in limited circumstances. This is particularly important for business owners who intend to keep their business operating while they receive the payment.
Do you need to completely stop your business?
Not necessarily.
There are two broad approaches you can take:
Option 1: Temporarily pause your business
For some sole traders, completely stepping away from the business is the simplest option.
Before your leave starts, consider:
- Letting clients know when you will be unavailable and when you expect to return.
- Completing outstanding work and invoicing before your leave.
- Setting up an automatic email response.
- Arranging for someone to monitor urgent enquiries.
- Cancelling or suspending unnecessary subscriptions and software.
- Making sure your BAS, tax and other lodgement obligations are covered.
- Putting aside enough money for tax, GST and other upcoming bills.
- Reviewing business insurance and other ongoing costs.
You don’t necessarily need to cancel your ABN or formally close the business simply because you’re taking a period of parental leave. In many cases, it may be more practical to keep the business registered but temporarily inactive.
Option 2: Keep the business running
If you have an established business, you may prefer to keep it operating while you take a reduced role.
For example, you could:
- Employ someone to undertake day-to-day work.
- Outsource administration or bookkeeping.
- Use a virtual assistant to manage emails and appointments.
- Reduce your client workload.
- Automate invoicing, payments and reminders.
- Move clients to a colleague or contractor temporarily.
- Restrict your business to existing clients rather than taking on new work.
The key is to separate running the business from personally performing the work. If you are claiming Parental Leave Pay, be particularly careful about doing work yourself on days you are claiming the payment
Plan your parental leave before the baby arrives
For employees, parental leave is usually planned around an employer’s policies. For sole traders, you are the employer, manager and business owner — so you need to make the plan yourself.
Ideally, start preparing several months before your due date. Decide what you want your business to look like while you’re on leave, communicate your plans to clients and suppliers, and make sure your accounting and tax obligations won’t become a burden while you’re caring for your new baby.
How can your accountant help?
Your accountant can help you plan the financial side of parental leave well before your baby arrives. This might include forecasting your business and personal cash flow, working out how much you need to set aside for GST and tax, reviewing your business expenses and subscriptions, and considering whether it makes financial sense to pause the business or have someone else keep it operating. Your accountant can also help you understand the tax implications of Parental Leave Pay and any changes to your business structure or income during your leave. A little planning upfront can give you greater financial confidence and allow you to focus on your new baby rather than worrying about your business finances.
Enjoy this exciting time
Having a baby is an exciting and important time in your life, and your business shouldn’t add unnecessary stress to it. Taking some time to plan your finances and business arrangements before your baby arrives can give you peace of mind and reduce the worry about what is happening with your business while you’re focused on your new family. Whether you decide to pause your business completely or keep it ticking along with some help, having a plan in place means you can step into parental leave with greater confidence — and enjoy those precious early months with your new baby.
This article provides general information only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. The information is current as at September 2026. Centrelink eligibility depends on your individual circumstances. You should check your eligibility with Services Australia and seek professional advice about your individual tax and business circumstances.
Rachel Craze 