Tax Planning Strategy 166 | Exempt Childcare Benefits

Tax Planning Strategy 166 | Exempt Childcare Benefits

Child care exemptions

Childcare expenses are not tax deductible to employees as they are considered private in nature. If provided by an employer they are subject to FBT unless they are deemed exempt childcare benefits.

Childcare benefits provided by an employer will be exempt from FBT under section 47(2) FBTAA where the employer has In-house childcare facilities. Salary packaging these child care benefits effectively allows the employee a deduction for their cost (although it is the employer actually claiming the tax deduction for the costs, and the employee reducing their gross salary to compensate for the benefit received).

For a child care benefit to be exempt:

  • The benefit must involve the care of children of any employees in a childcare facility. 
  • The facility must be on the business premises of the employer. Where the employer is a company, the facility can be on the premises of a related company.
  • The childcare facility has a person at the facility who receives or is ready to receive two or more children under the age of six (not being associates of that person), the facility receives the children for the purpose of minding, caring for or educating the children for the day, and the facility does not provide residential care.

Providing exempt child care benefits creates huge tax savings for employees with young children and would aid employee recruitment and retention. 

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