Kim Beazley’s plan to extend the fringe benefits tax exemption on child care to all employees would roll-back the financial situation of low and middle income families leaving them worse off.
The benefit from salary packaging child care using the FBT exemption would depend on an individual’s marginal tax rate. Under Kim Beazley’s plan, families facing high marginal tax rates may benefit but families on low and middle incomes would go backwards.
As Minister for Families and Community Services, Mal Brough MP, said today, the Howard Government provides assistance through the Government’s Child Care Benefit and Child Care Tax Rebate which make childcare more affordable.
Low and middle income families currently benefit significantly more under these benefits than they would choosing Kim Beazley’s plan.
For example, in 2006-07 a family with one parent earning $71,000 and the other earning $14,000 (a combined income of $85,000), requiring 50 hours a week child care for 50 weeks, would be $1,767.50 better off on the Child Care Benefit and Child Care Tax Rebate than they would under Labor’s plan.
Significantly, under Kim Beazley’s plan, if a family benefits from the FBT exemption for on-premises child care, then the Child Care Benefit and Child Care Tax Rebate are not available.
That means families on low and middle incomes who choose Labor’s plan would lose their entitlement to Child Care Benefit and Child Care Tax Rebate sending them financially backwards.
Why does Labor’s only child care plan ignore so many Australian families?