Child care should be tax-deductible, Tax Institute of Australia says

Updated

Child care should be tax-deductible in order to get more people back into the workforce, the Tax Institute of Australia says.

The Productivity Commission is already conducting a wide-ranging review of Australia's childcare system and there is a childcare rebate of up to $7,500 which is not means-tested, but the Tax Institute wants to go further.

The Institute's Robert Jeremenko says the tax break would get women back into the workforce.

"In addition to being simple, efficient, fair, it needs to make sure that it encourages workforce participation and that's what this is about," he told ABC News Breakfast.

"If we can encourage more parents - in the majority of cases women - back to work after having a child, should they so wish, by removing disincentives in terms of the costs of child care, then that's good for the whole country."

He says ultimately the Federal Government would collect more tax as a result of people earning more money.

But Mr Jeremenko admits it would be costly to implement.

"The Federal Government is very much committed to family assistance and, as you know, the paid parental leave scheme is another very expensive policy," he said.

"There are expenses attached to everything and we obviously have a burgeoning budget, but for the right decisions, expenses are acceptable."

Australian Council of Trade Unions president Ged Kearney says while the institute's suggestion has merit, a tax deduction could drive up the cost of childcare if it is not handled carefully.

"You think that ... 'more women have more money, we'll put the fees up'," she said.

"So you have to be very, very careful about how you tackle this problem and ... we want a really good look at the most efficient way we can spend taxes to get the most number of women back to work."

Tax-deductible nannies could be next

Before the election, Prime Minister Tony Abbott flagged looking at whether nannies could become a tax-deductible childcare option.

Mr Jeremenko says that too is a good idea, but general child care should be dealt with first.

"It is a case of baby steps, pun intended, to make sure we look at childcare tax-deductibility first," he said.

"But if we can get over that hurdle, then maybe look at nannies as well."

He says the Tax Institute will raise submissions with the Productivity Commission and look at getting further analysis on the scheme.

The Productivity Commission was set up following a Coalition election promise to look at making child care more flexible, affordable and accessible.

When announcing the commission in November, Mr Abbott said child care needed to be more responsible to the growing number of families who do not always work the traditional five-day, nine-to-five week.

"We think it is important, given that there hasn't been a serious look at the childcare system for two decades, that we have this serious look, see how we can improve it, see what we can do with our child care system to enhance participation, to boost productivity," he said.

The Productivity Commission will hold public hearings and take submissions before reporting back by the end of October.

Topics: tax, government-and-politics, child-care, family-and-children, australia

First posted