Money
Issue No. 27 - February/March
Child care: tax reform is overdue
by John Rawson
Most people know you can get a tax deduction for costs incurred in earning your income such as uniforms, self-education, or motor vehicle allowance.
Why then are child care costs not tax deductible despite it being a major cost to families when returning to work? It’s time for a major reform of child care expenditure.
While there is currently an FBT exemption and a Child Care Rebate available for child care, both the current exemption and the rebate are impractical in operation.
The FBT exemption requires employers to operate a child care facility on their business premises in order to claim the exemption. The cost of such a facility and the associated administration costs usually outweigh the benefits for most employers.
As a result, the exemption can only be used by very large employers and is out of reach for most. In fact, there is only one employer in South Australia that has a large enough workforce to sustain its own child care centre to take advantage of the FBT exemption.
This has left the majority of South Australians who have children without access to any support from their employers in relation to child care. The current FBT exemption does not extend or address the use of nannies, before and after school care services or off-site child care.
The recently introduced Child Care Rebate of 30% is only available in the year following the time the child care costs were incurred. This leaves a significant time lag between when child care costs are incurred and when the rebate is returned to parents. No other rebate is calculated this way. Parents need the rebate when they pay the fees, not two years down the track when they lodge their tax return.
Child care, including nannies and before and after school care, is a very important issue to address if we are to ensure there are enough people in the work force. ABS statistics indicate that approximately half of all children between 0 and 11 have use...
