Gov backbenchers call for childcare costs to be made tax deductible, SMH reports

Childcare costs, the Sydney Morning Herald (SMH) reports, should be made tax deductible for some families as the coronavirus pandemic changes the workforce, calling for a policy which matches ‘Liberal Values’ of choice and flexibility in working arrangements. 

Tax relief should be provided for families who can’t access existing childcare subsidies in what they believe would be a key measure to increase women’s workforce participation and Australia’s productivity as the country seeks to move out of recession, and migration is lessened due to the outcomes of the global pandemic.

One such plan, the SMH said, would allow families to choose to claim childcare costs as a tax deduction instead of accessing the existing fee subsidy. The current model costs the government $9 billion a year.

Under the revised model, which would cost an additional $608 million annually, estimates from the University of New South Wales (UNSW) suggest that the plan would lift GDP by $3.9 billion, based on pre-pandemic costs.

Part of the decision making process behind the proposal is that working from home has become more normalised as a result of the COVID-19 pandemic, which has changed popular conceptions about work flexibly and family responsibilities.

“We need to ensure this improved workplace flexibility becomes the new norm, as it will help give women more options and choice when it comes to work,” Liberal MP Dave Sharma told SMH. 

Other ideas, such as the potential impact of tax deductibility for childcare and how the interaction of the tax and transfer system may be explored, to lessen what he terms “disincentive traps” for women returning to the workforce post children.

As well as helping those on higher incomes who are currently ineligible for the child care subsidy, the proposal which some MPs have outlined is said to also support lower-income workers doing unusual hours who have to pay for expensive after-hours care or nannies.

The plan proposed by the Liberal backbenchers who spoke to the SMH and The Age is said to have been put to Mr Tehan, and follows some criticism leveled to the Coalition in the Federal budget following a proposal by Labor to subsidise up to 90 per cent of fees and extend assistance to families earning up to $530,000. 

Professor Rosalind Dixon, who co-wrote the UNSW paper, said many of those who served as frontline workers during the peak of the pandemic would benefit from a plan which supported families to decide the care they need and to make decisions about work versus care in a way that is not driven by the idea that going to work loses you money.

Speaking with the SMH, Mr Tehan said he would not comment about the idea of tax deductions, and that his immediate priorities were helping the childcare system in Victoria recover after lockdown and supporting the after-school care sector in all states.

During an appearance on Sky on Sunday, he indicated that the Government would continue to look at childcare policy in totality, understanding that “there will always be gaps for particular individual circumstances but what our policy on the whole has done is seen a 3.2 per cent reduction in out of pocket expenses across the board.”

To read the original coverage of this story, please see here.