According to an article in the New Daily today by Samantha Maiden, “Families would be able to claim child care costs of up to $60,000 a year as a tax deduction under a proposal to be launched by Liberal MP David Sharma on Tuesday”.
However, the biggest benefits go to families with a combined income of $280,000 a year or more who could slash their combined taxable income to $220,000.
Under the proposal, a family that could afford to pay a nanny $60,000 a year could split the cost 50:50 between two working parents as a tax deduction.
Each parent would then be able to reduce their taxable income by $30,000.
The Productivity Commission has previously recommended against making child care costs tax deductible, on the basis that it is not an effective means of support for lower- and middle-income families.
The article also features modelling by Dr Ben Phillips.
He found the policy would leave more than 205,000 households better off, representing one in five of households with children.
The average couple with children would be $618 per annum better off.
“Although households in the top quintile of the income distribution benefit the most on average with an average benefit of $1080 per annum, those in the second quintile (the bottom 20 per cent to 40 per cent of the income distribution) are on average $626 per annum better off. This represents a 1.9 per cent increase in disposal income,” the report states.
