Paid Parental Leave for Startups & Micro Business Owners
It’s a topic close to my heart – as I have a wife with an overdue baby in her belly as I type, and we both have small businesses to keep ticking over once our son arrives – every little bit helps when you want to take some time with a new member of the family (without letting all of the hard work put into building a business waste away by inattention at the same time).
I’m talking about paid parental leave for micro business owners.
Interestingly enough, the paid parental leave scheme is there for “workers” rather than “employees” – and so it is open to business owners who satisfy the eligibility requirements:
1. Work test – basically that of the 13 months leading up to the birth or placement, for 10 consecutive months there was at least 330 hours of work performed (averages out at at least 8 hours of work per week). This needs to be “paid” work, but self-employed people who perform work as a part of a business that is carried on for profit by that self-employed person counts as “paid” work (even though there are no actual “wage” payments which are referable to actual hours worked – and for a lot of the readers I expect that profits are still on the horizon).
2. Income test – adjusted taxable income (which for those of you with negatively geared properties allows net losses to be counted here) for the last financial year (for instance, if the baby is born on 6 May 2013, then the financial year is that which ended on 30 June 2012 – even though that was a long time before and things might have changed dramatically in your financial stakes since then), must be less than $150,000. Note that this is not a “combined” income, so forget about your spouse for now.
3. Australian resident
4. Primary carer of the child (basic rule is one primary carer at a time)
5. Not entitled to the Baby Bonus (basically most people have a choice between the two, but can only claim one – so this is probably better described as “not receiving the Baby Bonus”)
6. NOT REURNED TO WORK – this is a key issue for the self-employed, so I talk about it in more detail below.
So – those of you out there with a bun in the oven or planning to put one there, and for those of you with a hankering to be the primary carer to allow the mother to go back to work sooner, if you tick the above boxes then chances are you will get paid parental leave for all or part of the full 18 weeks – which at the current minimum wage of $606.50 per week (pre-tax) lands the total of $10,917. This will go up once the new minimum wage is in place – normally at the turn of the financial year.
However, whilst you may start out being entitled to Paid Parental Leave, you only have to return to paid work for more than ONE HOUR for the entitlement to cease – unless you are a clever small business owner who is prepared to play by the rules.
For business owners, not doing any work in their business is an impossible ask – as no one else knows how to do all of the things that need to be done. The Paid Parental Leave legislation allows for some light duties to be performed by the self-employed, but extreme care should be exercised by those of you who will dabble in activities that could be seen as “work” – as any payments you receive will be owed back to the Commonwealth and there are serious consequences for misleading or failing to update the authorities.
What is OK will include:
1. Generally overseeing the business
2. Occasional administrative tasks
3. Unpaid attendance at conferences or training courses
4. Work that is for less than one hour on the day in question
5. Status update meetings so you can keep updated
6. Handover tasks
7. Paying an account here and there
8. Checking the delivery of an order
9. Approving the business accounts
10. Dealing with ad hoc disputes
11. Organising a repair
12. Recruiting replacement staff
What is not OK – and will likely lead to the ending of your entitlement to Paid Parental Leave, includes:
1. Perform one hour or more of paid work in one day that is not specifically allowed (that is, not related to the overseeing of your business’ operations)
2. Keep on doing your ordinary tasks (even if you greatly reduce your work levels and hours – this will be considered to be you “back at work”)
3. Stepping in to cover staff absences – for instance if a staff member is sick and you just go in to cover one shift
4. Rolling up your sleeves to do your staff’s jobs for them because they just aren’t doing it right
5. Presenting a “business as usual” and “call me anytime” front to the public (as opposed to “here is my new manager” and “call them anytime”)
6. Working in someone else’s business in a substantive way – including where you are just helping them out to do something that you are good at
Unfortunately, once you cross the line there is no going back – there are no grace periods, and little understanding of what it will mean to the majority of micro businesses to be able to actually comply with the legislation. The cost of back-filling the operations with staff is likely to cost you more than what you will get from the Paid Parental Leave scheme in any case (as that only pays minimum wage), and the consequences in fines and even up to 6 months imprisonment mean that it is imperative for us all to be careful that we don’t fail to inform the Government of any changes in our circumstances.
The alternative is to look at applying for the good old “Baby Bonus” – which is $5,000 and not taxable – so that full $5k lands in your pocket (spread over 13 fortnightly instalments). The eligibility for the Baby Bonus is still something that may put it out of your reach, but if you are eligible and are concerned that you will fall foul of the “no work” requirement to access Paid Parental Leave, then it is a good alternative to look at instead. A summary of the things you need in order to be eligible for the Baby Bonus:
1. Have a baby or adopt a child
2. Be the primary carer of the child
3. Be a resident of Australia
4. Have an estimated COMBINED (that is, you and your partner) income for the 6 months immediately after your child is born / enters your care of $75,000 or less
5. Be eligible for Family Tax Benefit (outside of the income test) within 6 months of birth or placement
6. Apply within a year of the birth or placement
7. Do not receive Paid Parental Leave
Something is better than nothing, and if either of the Paid Parental Leave or Baby Bonus schemes are open to you as a self-employed person, then that is great. It certainly won’t be available to a lot of the self-employed due to the hoops that need to be jumped through, and that is a shame.
On a personal level, I think that we might apply for Paid Parental Leave for my very pregnant wife, and then take care in the weeks following the birth to ensure that the overseeing work she does on her own business is colouring within the lines of what is allowed. There is a grey-ish tinge to how the self-employed provisions will be interpreted and enforced down the track, and I recommend everyone out there planning on taking up the Paid Parental Leave offer be very careful to record the tasks they perform in their own businesses – including the time taken in each day to do those tasks – so that the eligibility can be proven to anyone who cares to look into your personal affairs, and there is an early-warning system for any updates in circumstances that need to be provided to the authorities along the way. Finally, when there is a requirement for actual “work” to be performed within the business that is going to tip the scales to remove eligibility for Paid Parental Leave – do not drag your feet in letting the right people know.
For more information, check out the Department of Human Services page at http://www.humanservices.gov.