Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Childcare) Share this | Hansard source

I am very happy to speak on the Tax Laws Amendment (2006 Measures No. 5) Bill 2006 because it gives me the opportunity to speak a little on fringe benefits tax and, in particular, the way that fringe benefits tax applies to child care. Certainly the fringe benefits tax system as it applies to child care is a mess, and I am not the only one who thinks so. In fact, there are so many problems with the fringe benefits tax regime as it relates to child care that even Bronwyn Bishop has lambasted the cabinet over its failure to act in this crucial area.

On 21 June, at a hearing of the work and family inquiry by the Standing Committee on Family and Human Services, Mrs Bishop said that the business premises rule as it relates to the fringe benefits tax on child care was an absolute mess. She said it was ridiculous. This is something—and let us be clear about this—that is government policy. This is not something that is at the whim of the tax commissioner or that the tax office could fix up if they just got their act together. This is a definite decision of the Australian government to insist on the business premises rule when it comes to child care, and the effect of this is that it makes it virtually impossible for your average business to deliver work based child care without paying fringe benefits tax on it. Mrs Bishop said, ‘The bottom line is that we do need the government to seize the initiative and amend the Fringe Benefit Tax Assessment Act.’ She also said:

... the government has not had the wherewithal or the stomach to make it a policy and do it properly ...

And so on. The chair of the committee made a number of other very sensible comments.

The tax commissioner admitted that the Australian Taxation Office does not know how many employers have on-site child care. What this means in effect is the government does not know how many employees are salary sacrificing child care, because the fringe benefits that employers are exempt from paying fringe benefits tax on are not reportable. Just one of the problems with the government not knowing how many parents have salary sacrificed child care exempt from fringe benefits tax is that the government has no way of implementing what the Treasurer said is the rule—that parents who pay for child care from pre-tax income are not eligible for the childcare benefit and the 30 per cent childcare rebate. The Treasurer confirmed this on 22 May in response to a question from me about the phenomenally generous Centrelink proposal—the tender for child care for Centrelink and other associated workers. The Treasurer said:

... where people are able to access pre-tax dollars for child care, as exists at the moment, the flipside is you cannot access the child-care benefit or the child-care tax rebate. The same rules that apply to any other employees at the moment will apply to those who may be eligible to take up an offer out of the human services agency.

That is all very good. People should not be double dipping. The problem is that the government has no way of knowing if they are because it has no records of who is salary sacrificing their childcare expenses in a way that does not attract fringe benefits tax for their employer. I do not know how the government could possibly cross-reference this information.

There are in fact very good reasons to suggest that parents paying their child care from pre-tax income may also be claiming the childcare benefit and the 30 per cent rebate—and it is not because they intend to rort the system. It is because the system is fiendishly complex and incredibly confused and because there are loopholes all through it. Take, for instance, the forms to claim the childcare benefit as a lump sum. The forms changed between 2004-05 and 2005-06. On the form for 2004-05 parents were asked:

Were all or some of your child care fees paid for you by someone else during the 2004–2005 financial year?

On the form for 2005-06 the question was changed to:

Were you liable for the cost of your child care during the 2005–2006 financial year?

I have been told by childcare providers that there are parents who are salary sacrificing child care at particular childcare centres and who are accurately stating that yes, indeed, they are liable to pay their childcare fees; at the end of the day, if they are not paid, of course they come looking for the parents. Some of them have even checked with the human resources area in their workplace and human resources have confirmed to them that yes, they as employees are liable to pay their fees—but the employees are simply paying the fees from their pre-tax incomes. So they are accurately answering that they are liable; however, they are still paying the fees from their pre-tax incomes.

What is happening is that a few lucky parents have employers who are able to comply with phenomenally narrow terms and conditions that allow a fringe benefits tax exemption on child care and thus allow their employees to salary sacrifice their childcare expenses. But, according to the paperwork that they are filling in, they are perfectly legitimately also claiming childcare benefits and the 30 per cent childcare tax rebate. It is obvious that this is not the Treasurer’s intention, but the system that he presides over is such a phenomenal mess, particularly when it comes to child care, that this is the result. It is just one more example of how the Howard government is failing parents when it comes to child care. If you look at the fringe benefits tax rule applicable to child care and its fiendish complexity and incredibly narrow scope and then have a look at the tender that Centrelink wrote for child care for its own employees, you get the notion that there is a phenomenal double standard applying here.

Incidentally, it is interesting that we have not heard of any progress on this tender since Labor exposed its conditions in May this year. Work based child care is a really good thing; work based child care for public servants is great and work based child care for other Australian workers is terrific too. What we should not accept is a system that allows two types of workers—public sector workers and private sector workers—to be treated differently under the Australian tax system. This is effectively what the tender for child care for Centrelink workers required the winning tenderer to do.

About 38,000 public servants would have had access to this, according to the tender documents. It was a tender drawn up under instruction from the Minister for Human Services, Joe Hockey. It covered 25,000 Centrelink staff and others who worked for Medicare, the Child Support Agency and other agencies. Basically the tender required the successful tenderer to provide child care wherever it was required by these public servants, whenever it was required—guaranteed. It required the successful tenderer to provide fixed price child care, to be paid from pre-tax income. This is something that the average Australian worker only dreams of.

The double standard is evident in a system where the Treasurer says: ‘We don’t need to do anything about fringe benefits tax on child care and we don’t need to accede to the suggestions of the chair of the work and family inquiry or other backbenchers like the member for Lindsay and others for tax-free child care, for a change in the tax treatment of child care. We don’t need to do any of that because’—as the Treasurer said at the budget—‘uncapping family day care and out of school hours care was going to fix every childcare shortage in the country. There are no real childcare shortages. There is no issue with price. We have done all of that by uncapping out of school hours and family day care.’ Then, at the same time, they are actually looking for a guaranteed, fixed price pre-tax system of child care for its own employees. This strikes me as extraordinary. If there really are not problems with childcare affordability and availability in Australia, why is there a special deal for 38,000 public servants? If there are genuine problems of affordability and availability in child care, why not address them for public servants but also for ordinary Australian workers across the country?

If you look closely at the provisions of the tender, it really is quite stunning. One of the things that the successful tenderer would have needed to commit to was priority placement over other children. Clause 3.3.1 states that priority placement for Centrelink families must be provided. This means:

The Contractor must ensure that a standard term of community enrolment includes a month notice to vacate requirement;

…     …         …

The Contractor must invoke the one month notice to vacate requirement if the placement is required by a Centrelink family ...

We subsequently had the government running for its life on this one because it meant that your child could have been in the same childcare centre for three years and, if your childcare centre was part of the successful tender, your child could be thrown out with one month’s notice for the child of a Centrelink employee. How inconvenient and stressful for the parents of the children and how terrible for those children who are used to attending one childcare centre. What of the disruption to the child’s learning process when they are unceremoniously uprooted and told to go and find another place to go to child care?

There was also a clause that required ‘the ability for Centrelink employees to salary package their childcare fees without Centrelink incurring a fringe benefits tax liability’. I just do not understand—and I cannot find anyone who can explain to me—how Centrelink can tender out the provision of its child care at the same time as meeting the requirements for child care to be fringe benefits tax exempt. Unless they lease, they are moving into existing centres all around the country. Unless they become the organisation taking the financial risk for what would have to be hundreds, if not thousands, of childcare centres around the country, I do not see how, under current fringe benefits tax laws, this is even legal.

The tender also said that childcare fees would be fixed by the government for five years. Don’t Australian parents just dream of that? At a time when the cost of child care is rising at four or even five times the rate of CPI increase, guaranteed-price child care for five years! It is like the film where they say, ‘Tell ’em they’re dreaming.’

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