Childcare is a significant expense for many parents and working families, so it’s no wonder so many parents would love the opportunity to claim this cost as a tax deduction to make their lives easier.
Back in 2014, we ran a survey asking you what would make the lives of working families easier. The overwhelming response? 90% of parents surveyed believed that childcare should be tax deductible. So, has anything changed?
Childcare and tax
Since our survey in 2014, a few things have changed but parent’s still can’t claim childcare as a tax deduction. While this expense might not be tax deductive, the government does offer alternative forms of support and payments designed to help take the pressure off of working families by providing financial assistance for childcare and the costs of having and raising kids. From the childcare subsidy to the family tax benefit and the parent payment, there are several different options available to eligible families in Australia.
Childcare Subsidy
Rather than make childcare tax deductible, the Australian Government instead offers a Childcare Subsidy (CCS). This scheme came into effect in July 2018, replacing the existing Childcare Benefit and Childcare Rebate programs. As the largest form of childcare assistance in Australia, it’s intended to assist families with the cost of childcare.
The purpose of this subsidy is twofold. Firstly, this subsidy intends to improve the development of children by providing easier access to early childhood education. Secondly, the Childcare Subsidy allows parents and guardians to work or study more by decreasing childcare costs.
This subsidy is paid by the government directly to the childcare provider, which in turn reduces the fees you pay. The amount you’re eligible for depends on several factors, including your family’s income, the type of childcare you use, the age of your child, and the hours you and your partner work.
Some families may be eligible for additional support in the form of the Additional Childcare Subsidy (ACCS), which is provided on top of the CCS scheme.
To receive the subsidy, you must meet the following criteria:
- Care for a child 13 or under who’s not attending secondary school (unless an exemption applies)
- Use approved childcare services, including long day care, out-of-school hours care, family day care, and in-home care
- Be responsible for paying childcare fees
- Meet residency and immunisation requirements
Trying to work out your out-of-pocket childcare costs can be tricky, which is why we developed our Childcare Subsidy calculator so you can figure out how much support you’re entitled to. For more information on the Childcare Subsidy or Additional Childcare Subsidy, including eligibility criteria and payments, you can read our articles on what is the Childcare Subsidy and Additional Child Care Subsidy (ACCS) - Transition to Work.
Family Tax Benefit
In addition to the Childcare Subsidy and Additional Childcare Subsidy, the government offers the Family Tax Benefit (FTB). This two-part payment is designed to assist eligible families with the cost of raising children.
Part A of the FTB is paid per child and the amount paid is dependent on your family’s circumstances. Part B of the FTB is intended to provide additional assistance to single parents, non-parent carers, grandparent carers, and families with one primary income.
To receive this payment you must:
- Have a dependent child or full-time secondary school student from 16-19 who isn’t receiving a pension, payment, or benefit like Youth Allowance
- Care for the child a minimum of 35% of the time
- Meet an income test
- To learn more about the eligibility requirements and how this system works you can read our piece on the Family Tax Benefit PART A and PART B.
Parental Leave Pay
Parental Leave Pay is a payment for up to 18 weeks that you might be able to claim when you take time off work to care for your new child.
There are several conditions you must meet to receive this payment, including:
- Be the primary carer for a newborn or newly adopted child
- Satisfy the income test and work test,
- Not be working during your Paid Parental Leave period, unless for allowable reasons
- Registered or applied to register your child’s birth with the relevant state or territory registry if they’re a newborn
As of August 2022, the Parental Leave Pay is $812.45 per week, which works out to $162.49 per day before tax. Read our article on Paid Parental Leave to find out more about Parental Leave Pay as well as Dad and Partner Pay.
Parenting Payment
The Parenting Payment is the main income support payment for people who are a young child’s main carer. This payment is separate from the Family Tax Benefit and Parental Leave Pay.
To be eligible for the Parenting Payment, you must meet the following criteria:
- Fall under the income and asset test limitations
- Satisfy the principal carer rules for a child under eight if you’re a single parent or six if you’re in a partnership
- Meet the residency requirements
- Your partner isn’t receiving the Parenting Payment
The amount you’re eligible to receive is dependent on your and your partner’s income and assets. These taxable fortnightly payments are claimed through Centrelink with the payment amounts revised annually in March and September.
Newborn Upfront Payment and Newborn Supplement
Although the Newborn Upfront Payment and Newborn Supplement don’t necessarily help with the cost of childcare per se, these payments are designed to help families while they’re not working so they can care for a new child.
You might be eligible for these payments if you meet the following criteria:
- You have a baby
- A child comes into your care, or
- You adopt a child
If your partner has already claimed these benefits or you or your partner has received parental leave pay for the child you aren’t eligible to receive these payments.
The amount you’re eligible for depends on your family’s total income and how many children you have. The newborn upfront payment is a tax-free lump sum of $595 per child. The newborn supplement is an ongoing tax-free payment for up to 13 weeks. The final amount depends on your family’s income and how many children you have.
Although childcare may not be tax deductible in Australia, the federal government offers several different payments and subsidies that are designed to reduce the cost of childcare and support families with the costs of having and raising children. For more information on the different payments and services available to eligible families, visit the Services Australia site.
All details correct at time of publishing.
