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Tax deductions for in-home childcare a solution to childcare crisis

17th November 2008

With a history of more than 40 years, DIAL-AN-ANGEL is Australia's only national group specialising in the provision of in-home childcare services. We have seen many changes in the childcare industry and believe we are in a unique position to comment on the recent ABC Learning collapse and the Governments response to the desperate need for childcare places nationally.

Governments are often loath to grant income tax deductions for private childcare.  This is a shortsighted and negative approach.  By allowing income tax deductions for carers engaged through reputable, authorised agencies - the cash economy would be better controlled and superior childcare for the next generation would automatically ensue.

Over the past 20 years, I have been trekking regularly to Canberra to meet with one or another of the Ministers (of both persuasions) involved with Government childcare policy. On each occasion and in response to every letter I've written, the Minister or her/his representative has stated categorically that "it would cost the Government too much in revenue to reintroduce the deductions and that they could not possibly consider this action as it could disadvantage the unemployed!" Yet $22 million dollars was handed out almost overnight.

The current situation represents a substantial and regressive move away from the principles of equity that underpinned policy from the mid 1970s to the mid 1990s. In the past when families received tax deductions for childcare, there was a choice of care for their children.  When this was discontinued, those families who were disillusioned with daycare or unable to secure a place in any type of childcare centre or who were not happy with the quality of care in group situations found themselves with no affordable alternative.  Parents have been obliged to pay fees even when they are not using a centre in order to retain the place; many have been concerned that their children tend to contract more illnesses at an earlier age due to the contagion factor in group settings.

Nearly all the families we speak to are receptive to in-home child care (especially where there are two or more children involved) but are unable to meet the costs associated with this service over the long-term.  They question why they are able to receive a large subsidy from the government for ABC and other daycare centres and such a small consideration for care undertaken in the child/ren's familiar and secure environment at home. Given that many of them have had to enrol their child/ren into daycare prior to their birth in order to try to ensure a placing, is indicative that the issue should be tackled at a higher level. 

A societal benefit from Government making appropriate changes to childcare subsidies is that such a move would effectively encourage suitably motivated young people to view childcare or nannying as a professional area of employment for which they would pursue certification or qualification - and not view childcare at home as simply "something to do" when they cannot obtain other work.  The result would ensure higher calibre applicants and families that are more appreciative.

Cognisant of the law, DIAL-AN-ANGEL is required to inform all clients who use its services for their home help requirements, that they (the clients) are required to cover their carers for Workers Compensation insurance, to register for PAYG tax and deduct tax from all payments made to persons performing home care services.  Private arrangements made between clients and workers often result in non-payment of income tax or Superannuation. The carers do not receive those benefits enjoyed by other employees.  Those who have been engaged through reputable agencies know that they will have prompt recourse to an independent third party where they would feel diffident about approaching a public servant of a Government department.

The current situation disadvantages the childcare workers, the parents, and most of all the children. The only people who seem to be benefiting are the taxation office and companies such as ABC Learning.

I hope that you will join with me in putting a case to the Government to reintroduce childcare deductions to make it affordable for parents to have a right to choose how and where they would like their very young children cared for whilst they are at work.