NO.108

NEW EARLY START DATE FOR CHILD CARE REBATE

The Government will assist families further with the cost of child care by

backdating the introduction of a new 30 per cent Child Care Rebate to 1 July

2004, enabling families to claim an extra six months of out-of-pocket costs.

As a consequence parents should keep all receipts for childcare paid in the

current year.

The Government will work closely with child care providers to encourage them

to provide an annual statement of child care expenses paid. This will assist

parents in claiming their entitlement.

The Rebate will cover 30 per cent of out-of-pocket child care expenses, that

is, fees paid for approved care less Child Care Benefit (CCB), for taxpayers

who receive CCB and meet the CCB work/study/training test.

CCB is primarily claimed fortnightly through reduced child care fees based

on an estimate of family adjusted taxable income. Centrelink then calculates

the correct entitlement to CCB on an annual reconciliation once it has received

child care usage data and the family’s annual adjusted taxable income

when tax returns are lodged. This is usually before the end of November.

The correct amount of out-of-pocket child care expenses can only be calculated

once the final reconciliation of CCB is completed. The 30 per cent Rebate will

be claimed on the succeeding year’s tax return. This means that the Rebate

entitlement for the 2004-05 year will be claimed in the return for the 2005-06

year.

This procedure will allow the calculation to be quick and avoid the complexity

of trying to claim a rebate before the final amount of CCB is known.

In recognition that payment will be made in a subsequent year’s tax return,

the start date for eligibility has been brought forward from 1 January 2005

as originally proposed to 1 July 2004.

The Child Care Rebate will be payable up to a maximum rebate of $4,000 per

child. According to calculations of current usage and fees very few parents

will hit this maximum level.

The Rebate is non-refundable, however to ensure families

obtain the maximum benefit possible, taxpayers with insufficient tax liability

to absorb the whole rebate will be given the option of transferring any unused

amount to their spouse.

The Child Care Rebate will provide additional child care assistance to around

640,000 families with a total cost of around $1 billion over four years.

The Child Care Rebate builds on the current Child Care Benefit system, which

is paid on the basis of a family’s income, the number of children in care

and the type of care. Families using approved child care services and on the

lowest incomes receive the highest rate of CCB.

Over the next few months, the Tax Office, Centrelink and the Department of

Family and Community Services will work closely with approved child care providers

to develop a package of information to help families claim the child care rebate.

20 December 2004

CANBERRA

Contact: David Alexander

02 6277 7340