Since the introduction of the Goods and Services Tax (GST) on 1 July 2000, all centre-based childcare and in-home care were considered to be educational institutions, and hence their fees do not attract GST. The latest enactment of this is the Commonwealth’s GST-free Supply (Child Care) Determination 2017.
However, in New South Wales, centre-based community and not-for-profit childcare services do not attract payroll taxes, regardless of their childcare fee structures. Yet privately-owned centre-based childcare services in NSW who offer similar educational services are obliged to contribute payroll taxes.
As Early Childhood Education and Care is significantly reliant on labour, such labour costs generally represent about 70% of the services’ overall costs.
Particularly when the vast majority of childcare service providers are small family-owned business, ACA NSW is asking the NSW Government to consider increasing the payroll tax threshold to $2m per financial year for FY2018/2019 onwards for Early Childhood Education and Care Approved Providers on the basis of:
- consistency with similar centre-based community and not-for-profit childcare services; and
- the savings for services will most likely be passed onto parents as downward pressures on childcare fees, increases in educational resources for children, and/or increases in staff wages and services’ abilities to hire better staff.
ACA NSW is also asking the NSW Government to consider introducing an appropriate indexation scheme for payroll taxes to take into consideration changes in payroll due to regulatory impact and/or Fair Work Commission decisions. For example, since 2014 there are unions who were still seeking to increase wage rates of all childcare employees by 39%-72%.