I have a confession to make: my children did not attend a structured learning pre-school. Nor did most of their friends. If you believe the propaganda about the benefits of early childhood learning, they should currently be homeless, having dropped out of school.
(Funnily enough, when I was a pre-schooler, my mother sent me to a local privately operated show – it was before the time of free kindergartens in Victoria – run by two single women who probably had no qualifications at all. It was run out of the family home of one of them. I first went when I was three, for a few hours every day during the week. There I was taught how to read, write and count – something that is frowned upon these days. I do remember preferring the sandpit.)
Anyway, the government’s childcare policy is clearly showing some stresses and strains as a result of the combination of new regulations (qualifications for staff, new staff ratios and requirements for structured learning, whatever that might mean for three year and four year olds – painting with meaning? ) and subsidy arrangements for parents using formal childcare. (Informal childcare and nanny costs are completely excluded.)
The subsidy arrangements come in two parts: a non-means tested childcare rebate capped at $7500 per year per child and a means-tested (based on family income and number of children in formal childcare) childcare benefit.
As the costs of childcare have escalated, mainly in response to the cost of the new national regulations and higher childcare worker wages, the latter with the support of the federal government, increasingly the annual cap is binding and the supposed 50 per cent of out-of-pocket expenses being incurred by parents with children in childcare is being exceeded.
The government is in a bit of quandary as to its response, particularly as it does not want to commit more dollars at this stage. The relevant minister, Kate Ellis, seems to be fresh out of ideas apart from the appalling idea of the government ticking off (or rejecting? modifying?) fee rises proposed by childcare centres, as in the case of private health insurance rates (oh, and that has been a big success).
The feasibility of this proposal is quite dubious – in the case of private health insurance, there are not too many companies and they have been forced to synchronise their rate changes. But there are thousands of childcare centres and forcing synchronisation could send some of them broke.
There is a story in The Age about moving to a system of making childcare costs tax-deductibility – the study finds such a change would benefit higher income earners. Duh, I hear you say. I’m not sure why they bothered to do the study if that was all they could find.
A family that spends $500 a week on childcare and has an annual income of $75,000 currently receives $13,564, or 54 per cent, of their care costs in government payments.
However, according to the modelling, if the same family were able to deduct childcare costs from their taxable income the amount they would receive back would be 31 per cent of their out-of-pocket expenses, or a tax reduction of $7625.
A family earning $235,000 a year now receives $7500, or 30 per cent, of their out-of-pocket costs in government assistance.
Under a system that provided tax deductibility for care costs, that family would have 42 per cent of their care costs covered, or a tax saving of $10,515. Once a family’s income reaches about $150,000 they no longer receive the means-tested childcare benefit.
The modelling showed tax deductibility favoured people on incomes over $150,000 because they spent more on childcare so were able to claim more back.