Childcare tax break for women

Caroline Overington

AUSTRALIA has one of the lowest rates of female workforce participation in the developed world – and the expensive, frustrating, unworkable system of childcare is to blame.

A new report on the work-family balance, tabled after an 18-month inquiry yesterday, recommends that parents get a tax break on childcare expenses, by making all fees, including nanny wages, deductible.

Childcare is a prerequisite for working parents, and ought to be treated the same way as mobile telephones, laptops and company cars, the report says.

Educated, highly paid women would be more likely to return to the workforce if childcare fees were not prohibitive, and a boost in the women’s workforce could add between 2.8 per cent and 4.4per cent to the national income, the report says.

The benefit to the economy would be greater than that of the 2000 tax cuts. The inquiry, chaired by Liberal MP Bronwyn Bishop, described childcare as the new “flashpoint” in the battle between work and raising families, and said the federal Government must encourage mothers to return to the workforce “without forcing them to become the overstressed supermum”.

Families are “stressed” by current childcare arrangements, the report says.

“They do not meet the needs of people who want a working life and a family life,” it says.

The inquiry heard that police, fire and emergency services were losing female staff at the rate of 30 a month or more, mostly because the women cannot find suitable childcare.

“It’s just becoming impossible,” says Jo Harrison Ward, the chief executive officer of the West Australian Fire and Emergency Services, and formerly the executive director of the West Australian police force.

“Seven per cent of our staff left the service last year and in exit interviews, the women said they were leaving because they couldn’t get flexible childcare.”

Three-hundred women quit the service last year, saying they couldn’t manage the 24-hour, seven-day schedule, and have children.

Suzannah Fussell is a firefighter at the Perth fire station with two children, Iona, 14, and Imogen, 3.

She’s a single mum and “managing the roster, it can be a nightmare. I’m on nights, weekends, two days on, two days off.” She received a childcare benefit but can use the centre only during regular hours.

“It doesn’t really help people who have to work odd hours,” she said. “I have to rely pretty heavily on other people.”

The report recommends making childcare costs, including nanny wages, tax deductible, and removing fringe benefits tax on childcare provided by employers.

Childcare expenses are not tax deductible except by way of salary sacrifice, which is available only to employers that provide their own childcare centres.

“Childcare is a prerequisite for a parent to be made to participate in the workforce,” the report says. “Giving workers a tax concession for childcare expenses acknowledges that, in a competitive global economy, Australia cannot afford to lose some of its most highly educated and highly skilled workers.”

The report also criticises the current system of offering fringe benefits tax exemptions only to large employers, such as the major banks, that are able to build or lease childcare centres “at enormous expense and financial exposure”.

“Employers would be able to do a lot more for their staff if they had the choice of paying for: any number of places in a childcare centre, an in-home (nanny) carer, family daycare, occasional care, vacation care, or outside-school-hours care, without the penalty of fringe benefits tax,” the report says.

The report quotes a Department of Family and Community Services paper that estimates the total economic benefits of childcare to be worth $8.11 per dollar spent.

On current government childcare expenditure of $2.3 billion a year, this estimate suggests a return of $18.6 billion to the economy.

It says motherhood “decreases the likelihood of being in the paid workforce”.

“While participation rates of Australian women with dependent children have increased significantly, they are not as high as others in the OECD,” the reports says.

“In 2003, the participation rate for women in Australia with two or more children was 56.2per cent, compared to 61.8per cent in the United Kingdom, 64.7 per cent in the US, 68.2 per cent in Canada and 77.2per cent in Denmark.”

Access Economics researched the economic effects of increased female participation in the workforce and concluded that “an increase in women’s full-time participation … would produce the most astonishing results for our national economy.”

But the deputy chair of the Family and Human Services Committee, Julia Irwin, described the report as a wasted opportunity, and Labor members included a scathing dissenting report into many of the report’s recommendations.

“Balancing work and family is the most important social and economic issue of our time. If we cannot get the right policies to assist working families, our nation’s growth will slow and our families will suffer,” she said.

“All families need help – tax deductibility of childcare and the minor measures proposed in the report won’t deliver this. The committee’s research shows tax deductions for childcare will only benefit higher income earners and not encourage women to increase their hours of work.”

The Australian,  December 08, 2006.