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Tax concessions or transfer payments – an examination of child care reform proposals


Child care policy involves balancing a number of policy objectives, including workforce participation rates by parents, access to early childhood education, ensuring the quality of child care services and ensuring that supply meets the growing demand. While access to child care has always been a contentious issue in public policy, over recent years the need has been driven by productivity issues; in order for Australia’s economy to continue growing, married women must be encouraged to remain in the workforce. Three key reports have been recently released, making recommendations as to how the system of tax incentives and transfer payments can be reformed to make child care more affordable, thus making work more financially rewarding for mothers. These recommendations include increased transfer payments; tax deductibility of child care; earned income tax credits; and fringe benefits tax (“FBT”) exemptions. This paper examines the proposals in each report, considering the efficiency and equity of each of the proposals. It concludes that while the proposals may make child care more affordable in the short term, they all decrease the equity of access to child care for lower income families. In the absence of measures to improve the supply and/or location of child care places, they will result in increases in child care costs.

Author profile

Dr Helen Hodgson CTA
Helen joined Curtin Law School as an Associate Professor in 2014, following 10 years teaching in the Atax programme at UNSW. Helen has a particular interest in tax policy, and was a participant at the 2010 Tax Forum. Her current area of research is the tax-transfer system, but she also researches in superannuation, and the gender impacts of the tax-transfer system. In 2010, Helen was a co-author of the Women's Voices Report commissioned by the Equality Rights Alliance to examine factors influencing women's workforce participation, including superannuation, tax and transfer issues. Helen holds qualifications in accounting, business law and taxation, and is a Fellow of the Australian Society of Certified Practising Accountants. - Current at 08 July 2019
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