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Tax Forum: should nannies for high income women be subsidised?

Subsidies for nannies could help retain skilled women in the workforce, but isn’t without pitfalls. AAP

Some very well-paid women want to use the Tax Forum to press the government to substantially subsidise the costs of nannies by allowing their costs to be tax deductible.

They claim this is essential to allow some high income skilled women to return to their full time paid work.

But this suggested change to child-care subsidies raises some interesting questions about the purpose of this type of government funding, as well as possibly exposing children to lesser levels of care.

It may also encourage powerful women to exploit many less powerful ones.

Parental needs first

When women’s groups argue for nanny subsidies for those who can’t find formal care, the focus is for parental needs - there is no mention of the benefits of such care for either children or the home-based worker.

The two clearly different political questions are often confused in the public subsidies on offer for a range of children’s care services.

Governments set standards so these can meet children’s needs for social, emotional, physical, intellectual, and educational development as well as ensuring parents can afford the costs of services.

Some of these are also organised so they allow parental time for paid work, studies or other approved activities.

For around a century it has been recognised that children from a relatively early age benefit from group interaction and designed activities.

The movement brought about the development of kindergartens and preschools which offered learning experiences which complemented home-based care.

Crèche and child care services dating from the same time also assisted women who had to work, for instance as servants, but since has developed as a mix of development and care, as more and more mothers moved into paid work.

The first federal child care funding Act in 1972 was designed to fund 70% of the salaries of a qualified teacher to improve the quality of care services.

As children’s services developed in that decade, early subsidies were paid directly to providers, with a later addition of fee subsidies to ensure lower income mothers could afford quality services for their children.

However, by 1996, the market influence that had begun in the 1980s had moved funding entirely to the current model of subsidising parents costs.

Subsidies system

The maximum subsidy possible is now around $150 per week for the child care rebate, if you spend twice this on approved care.

The child care benefit subsidy increases to a maximum of $189 per week if your family income is under $39,785, tapering off at $138,000 per annum in approved care.

If you are ineligible for this subsidy, but use a registered carer such as relative or nanny, you receive $31.60 per week.

Low income recipients will get some of both the rebate and benefit, but most higher income earners will get only the rebate.

As most fees for full-time care range from $350 $600 plus per week, parents can have a significant gap to cover.

These categories make a clear distinction between using services that meet approved standards, while carer registration just requires a tax file number and some identification.

Tax deductibility generally will only help high income earners - and then only if the rebate cap is lifted.

For most lower income earners, the current subsidies exceed the amount parents would receive if child care is a tax deduction at their marginal tax rate.

Regulated care

While there are arguments that costs may be too high for some second income earners, and there is a need to look at fee rebates for regulated care.

This should not include home-based services as these offer no quality assessment or regulation.

The argument may be that it is parental choice. This view underpins the government’s own funding model which assumes falsely that parental choices will both influence the quality and supply of care to the benefit of the consumers.

As there is no serious choice for most parents, the market doesn’t work. However, the model suggests that the funding is just a subsidy for fees rather than designed as a contribution to quality care as a public good.

The logic therefore can be that parents choosing to have their children cared for in their own homes should have access to similar subsidies as those using outside services.

This assumption ignores the other quality and educational aspects of care that are implicit in the funding and regulation.

Costs are influenced by regulated qualification and ratio requirements, as well as standards of care and programs.

At present, national standards are being set for staffing ratios and qualifications and this may lead to higher fees.

So the pressure is to raise subsidies to make sure people can afford the mandated quality of care. Therefore quality of care should be discussed as a justification for subsidies.

Legal standards for nannies

The current nanny subsidy is a token of around $5 per day but its existence - and the pressure to increase it - raise a series of significant questions.

There are no current legal standards for nannies.

Many employed in this area are young people, maybe students, and often part of the cash economy.

However, if the pleas of high-income women are taken seriously, the nannies to be subsidised would need to be full-time - thus also allowing mother corporate high flyers to work the ridiculous hours demanded at that level.

There are questions of the standards of care, as what may satisfy parents and mirror their own views does not guarantee quality for children.


New childcare rules set a Certificate 3 as the minimum qualification for all carers, which covers only basic care needs and activities.

If the parents want someone who could also respond to developmental needs and program some appropriate activities, they would need at least a Certificate 4 or even a Diploma, and these are in high demand.

Hiring a competent person to care for your child(ren) at home requires a considerable investment of time and money.

Assuming that people will pay according to awards and stick to legal working conditions, a 40 hour child care worker on say $25 per hour would cost $1,000 per week.

As most parents want some flexibility, this pay rate would probably increase as the worker stayed for more hours on some days and will have no time off even for meals. If the rate was casual it would include sick pay and holiday pay.

They would need to cover insurance, workers compensation and other on costs and take out tax. There is a need to have a backup when the worker is ill or on holidays.

Cash temptation

The temptation is not to do it formally, as many are probably cash jobs now. The supply will be limited as young people move on so this model won’t work necessarily work for the long day care that would allow senior executive women to stay at work in ways that match their male peers.

As home-based workers are not generally recorded in any significant way or specifically regulated, we have little idea of how many private carers there are.

Could a possibility be that the lack of local candidates may result in applications for temporary work visas to import nannies for the Philippines, like they do in Hong Kong and the Gulf States?

Rather than expanding this type of payment, Government should make it clear that its primary objective is ensuring children access quality care when their parents are otherwise engaged.

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