TREASURER:
Well today the Government is announcing a new child care rebate which will lift the cost that parents are incurring by giving them a rebate on their tax of 30 per cent on any out of pocket child care expenses, and we will be bringing forward the start date for this measure - which was going to apply from 1 January next year - so that it applies from 1 July in the current year.
This new increased child care rebate applying for the full amount of out of pocket expenses in the current financial year will make it a very welcome Christmas for the mothers of Australia who can be confident that they will get back 30 per cent of their out of pocket expenses either claimed off any tax that they pay or transferred to the husband against any tax that he pays. This will mean that for many working women they will get better than tax deductibility. Tax deductibility would apply if you were on a top marginal tax rate of 30 per cent but for many women they will not be on that or they would certainly not be on it for all of their income.
So for all of those women who are tax payers on a top marginal rate of 30 per cent, this is better than tax deductibility. It means that families will be covered up to 50 hours a week for 51 weeks of the year with a cap of $4,000 and ensuring nearly every person can maximise the full amount of the rebate. And I would say to families, the important thing is to keep records, keep records of all of your child care paid from now on and if you have records of child care paid from 1 July keep those as well.
Now, there will be some people that haven’t kept the records because they weren’t expecting this to start from 1 July. So the Government will be speaking to child care operators and encouraging them to produce an annual statement at the end of the financial year so that parents who maybe haven’t kept the records or don’t know the amount they will be eligible for will be able to get some back records and make their claims.
This is going to be of benefit to all working women in Australia, it will be of enormous benefit to families, it will start six months earlier than originally foreshadowed and it will deliver additional benefits to the families of Australia.
JOURNALIST:
Treasurer how much will that extension cost the Government?
TREASURER:
It will mean an extra $140 million for six months. We were budgeting for $140 million for six months eligibility from 1 January 2005 to 30 June 2005 and we estimate that back dating it will deliver an extra $140 million to the families of Australia.
JOURNALIST:
Mr Costello just to clarify, will this shift the liability from 05-06 to 06-07?
TREASURER:
What we have done is we have made it clear that you can claim it once you have got your child care benefit. Now, you won’t get your child care benefit until after the end of the June 2005 year. So you can’t claim it on that tax return, you don’t actually get your child care benefit until you have lodged that tax return. So once that has been lodged, once your child care benefit has been calculated, then you will be able to calculate your child care rebate and you will be able to get that on the subsequent tax return.
JOURNALIST:
Mr Costello, would it have been prudent to save as much as you can in the kitty for any reform, financial reform programmes in May?
TREASURER:
Well this is an extra $140 million for the working mothers of Australia and it means that the working mothers of Australia, after they have been paid the child care benefit - I want to make that clear - the amount that they are out of pocket, the difference between what they have paid and what they have got in child care benefit can be claimed 30 per cent as a tax rebate. And that is better than tax deductibility for low income earners, better than tax deductibility even for people on a marginal tax rate because their average tax rate won’t be 30 per cent and we figure that it will be enough to cover the expenses of high income earners using child care for 51 weeks of the year 50 hours a week. So this is an extraordinarily generous benefit to help working mothers with the costs of child care.
JOURNALIST:
Mr Costello why have you back dated it for these six months? Have you got a huge budget surplus that is burning a hole in your pocket?
TREASURER:
No, we backdated it because we thought it was fairer if it took place from the start of the financial year. You will only be able to calculate your entitlement after you have filed this year’s tax return and you will only be able to get the rebate the year after. So we thought the fair thing to do was to back date the entitlement so you will get a bigger entitlement even though it will be on the tax return after this one.
JOURNALIST:
Treasurer how do you reconcile this largesse with your post election warnings of moderating growth and pressure on the Budget?
TREASURER:
Well when you say it is largesse it is an extra $140 million to the mothers of Australia. And I think it is thoroughly deserved and I think it is affordable and what is more, by encouraging mothers who are utilising child care to take advantage of this, you may actually get more mothers who are able to re-join the workforce and I think it will be a good economic investment for the country. Let me make this clear, what you are getting is you are getting a 30 per cent return on your taxes. So, if this encourages more mothers to return to the workforce, the taxpayer is still going to be in front.
JOURNALIST:
Will this reduce the size of the surplus or have you got additional revenue that is going to cover this?
TREASURER:
Of course it will reduce the size of the Budget. This is another $140…
JOURNALIST:
The size of the surplus?
TREASURER:
…well, I am not saying what the situation of the Budget is, but this is $140 million straight off the bottom line back into the hip pockets and the wallets of the mothers of Australia.
JOURNALIST:
Mr Costello when this was first announced during the election it was uncapped, how did you decide on a $4,000 cap?
TREASURER:
Because it will hardly affect anybody. But there is another more important reason. We don’t want child care operators to put fees up. This is a very important point. We are introducing a 30 per cent rebate for out of pockets. If the child care providers put fees up, they might try and capture the benefit. So we don’t want the child care providers to say, ‘well now you are paying 30 per cent less for your child care, we will put the fees up 30 per cent,’ because if the child care providers did that the women of Australia would not be better off. And so this is a warning to the child care providers that you are not going to be able to go for unlimited fee increases.
JOURNALIST:
Does this mean that the value of this will diminish over time?
TREASURER:
No.
JOURNALIST:
Will this measure take strain off the 05-06 Budget?
TREASURER:
No, sorry to disappoint you but this is actually an additional $140 million to the mothers of Australia. Now I know you like to be cynical about things but I think it is a great thing for the mothers of Australia. They were going to get six months of their out of pocket child care expenses rebated at 30 per cent, now they will get 12 months. My only concern is this and the reason I am making the announcement now is I want them to keep their receipts. Because if they haven’t got their receipts they are going to find it hard to calculate what their out of pockets are. Now, I know there will be some mothers that may have already destroyed their receipts for the first six months of the financial year, that is from 1 July until now, so I am going to speak to the child care providers and I am going to ask the child care providers to actually supply a statement to them. Some of the child care providers will find that a bit of a burden if they are not computerised or automated, we will talk to them and try and help them but my message to the mothers of Australia is this is a great announcement, this will help families, it will encourage mothers that are struggling with child care expenses but please do keep your receipts because you will need them.
JOURNALIST:
Mr Costello what is your message to Mr Howard who celebrates a milestone as second longest serving Prime Minister tomorrow?
TREASURER:
Well it is a wonderful achievement to be the second longest serving Prime Minister, second only to Sir Robert Menzies, Australia’s greatest Prime Minister. It makes you Australia’s second greatest Prime Minister and I just want to say to him that this is a wonderful milestone, thoroughly deserved after four election victories and I hope he celebrates it very happily with his family as I believe he is going to tomorrow night.
JOURNALIST:
Mr Costello do you have any ambitions to be the longest serving Treasurer?
TREASURER:
Well look, I have ambitions to run the best economy that we possibly can and to get more people in work than we have ever had. And at the moment we do have more people in work than we have ever had in Australian history before and it is my ambition to keep it that way.
JOURNALIST:
In hindsight did John Howard make the right decision to stay on?
TREASURER:
I congratulate him on an absolutely stellar performance, he is Australia’s second greatest Prime Minister to Sir Robert Menzies, Australia’s greatest Prime Minister. To have won four election victories is something that will give him a place of history which very few people will ever be able to take away from him. He deserves every credit for a wonderful and a magnificent electoral performance and I just hope that he can enjoy himself with his family. Thank you very much.