The recent rulings of the Tax Office on child care which came to light this week demand the immediate attention of whichever party forms government after March 2.
A lot of the complexities of the tax law have grown up in the past two decades because of the incessant game played between government and business over maximising and minimising the tax. Every trick played by business and every loophlole exploited results in complex legislation to overcome them. The complex and detailed fringe benefits and capital gains taxes are good examples of governmental responses to business and highly paid employees overcoming income tax.
While the tax game centres around company cars, obscure off-shore trusts, deferred dividends and the like, one can bemoan the inefficiency of it, but essentially business (collectively) has brought a lot of it one its own head. However, when one is dealing with imposing fringe-benefits tax on some child-care provided by employers (even as salary sacrifice), the argument takes on a different character.
Whatever the tax rulings and tax law say, it should be obvious that child care costs are not private expenditure and are not employee benefits. They are a necessary expenditure in earning income. No child care, no work.
Child care should not attract fringe-benefits tax. Rather it should be a direct tax rebate replacing the present cumbersome (though superficially electorally attractive) cash-in-hand scheme which is expensive to administer.