6 July, 2005

The next National Government will introduce a new tax deduction for pre-school childcare costs to ease the financial pressures on parents, particularly on second-income earners and employed sole parents, National Party Leader Don Brash announced today.

The policy will take effect on 1 April next year, and will cost an estimated $160 million per year.

In the first step in a phased release of tax policy, Dr Brash says “National intends to support families by providing them with real choices about how they balance and manage their own lives.”
“National recognises that childcare costs are a serious burden for families.

“The basic principle behind this policy is that we regard childcare costs as a legitimate work expense for second-income earners who would otherwise be engaged in childcare, and for employed sole parents.

“National will recognise as tax deductible the pre-school childcare costs of working parents up to $5,000 per child.  Costs will be deductible at 33% of out-of-pocket childcare costs.  In effect, one-third of childcare costs will be able to be claimed, resulting in a tax refund of a maximum of $1,650 per child.

“This will be available for all forms of childcare – that provided by registered childcare centres, or informal arrangements such as nannies and other home-based care.”

The deduction will be modelled on the existing housekeeper rebate.

“Providing a tax deduction will enable parents to choose the type and duration of childcare which best suits their circumstances.

“National recognises that childcare choices made by families vary according to where they live, the service they use and the hours they work.  We do not think the government should dictate what sort of childcare is best for families.

“This policy is designed to ease the burden faced by parents who choose to work outside the home and bring up children, and reflects the fact that for most families financial pressures mean that both parents need to work.”

National’s full tax package, to be announced at a later date, will ease the pressures on middle-income families.