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.
Copyright ATO, 20 December 2004. http://ato.gov.au/nonprofit/content.asp?doc=/content/52864.htm