Tax Laws Amendment (2005 Measures No. 4) Act 2005 (160 of 2005)
Schedule 1 Child care tax offset
Part 1 Main amendments
Income Tax Assessment Act 1997
2 After Subdivision 61-I
Insert:
Subdivision 61-IA - Child care tax offset
Guide to Subdivision 61-IA
61-460 What this Subdivision is about
You are entitled to a tax offset for an income year for child care fees if you meet certain conditions.
The amount of the offset is 30% of the difference between the amounts for each child, in the previous year, of child care fees incurred and child care benefit entitlement. This is subject to an indexed cap of $4,000 per child.
If the amount of the tax offset exceeds the amount of your income tax liability, the excess may be transferred to your spouse as a tax offset.
Table of sections
Operative provisions
61-465 Object of this Subdivision
Entitlement to the child care tax offset
61-470 Who is entitled to the tax offset
61-475 Meaning of approved child care
61-480 Meaning of entitled to child care benefit and entitlement to child care benefit
Amount of the child care tax offset
61-485 Amount of the child care tax offset
61-490 Component of formula - approved child care fees
61-495 Component of formula - child care offset limit
Transfer of entitlement to unused balance of child care tax offset
61-496 Entitlement to transfer
61-497 Form of transfer
Operative provisions
61-465 Object of this Subdivision
The object of this Subdivision is to provide a *tax offset to assist families with the cost of child care.
Entitlement to the child care tax offset
61-470 Who is entitled to the tax offset
(1) You are entitled to a *tax offset for an income year (the child care offset year ) for *approved child care provided in the previous income year (the child care base year ) if:
(a) you are an individual; and
(b) there is at least 1 *child care base week for you and a particular child in the child care base year.
Example: If there is at least 1 child care base week for you and a child in the 2004-2005 income year (the child care base year), you are entitled to a tax offset for the child for the 2005-2006 income year (the child care offset year).
(2) A week is a child care base week for you and a particular child in the child care base year if:
(a) the week starts on a Monday in the child care base year (whether or not it finishes in the child care base year); and
(b) you are *entitled to child care benefit for *approved child care provided for the child in the week; and
(c) one or more of the following limits applies under Subdivision G of Division 4 of Part 3 of the A New Tax System (Family Assistance) Act 1999 to your *entitlement to child care benefit for that week:
(i) the 50 hour limit (see section 54 of that Act);
(ii) the more than 50 hour limit (see section 55 of that Act);
(iii) the 24 hour care limit for a particular session (or sessions) of care (see section 56 of that Act).
Note: If one of the paragraph (c) limits applies, you satisfy the paragraph (c) condition even if you have not used approved child care for the child during the week up to the full extent of the limit.
(3) If you are *entitled to child care benefit subject to a limit of only 20 hours for a week under subsection 53(3) of the A New Tax System (Family Assistance) Act 1999, the condition mentioned in paragraph (2)(c) is not satisfied for the week.
61-475 Meaning of approved child care
(1) Approved child care , for a particular child, is care provided for the child by a child care service that is approved under section 195 of the A New Tax System (Family Assistance) (Administration) Act 1999.
(2) Approved child care is also taken to have been provided by such a child care service for the child during a period of absence from care if section 10 or 10A of the A New Tax System (Family Assistance) Act 1999 applies to the period of absence.
Note: If a child is absent from care during a period for which child care fees are incurred for the child, but neither of sections 10 or 10A of the A New Tax System (Family Assistance) Act 1999 apply to the period of absence, approved child care would not be taken to have been provided for the child. As a result, child care fees incurred for the child during the period would not count as approved child care fees for which the child care tax offset is payable (see sections 61-485 and 61-490).
61-480 Meaning of entitled to child care benefit and entitlement to child care benefit
(1) You are entitled to child care benefit for *approved child care for a child as provided in this section, and not otherwise. The amount of your entitlement to child care benefit for the care is as provided in this section, and not otherwise.
Note: Child care benefit is a benefit provided for by the A New Tax System (Family Assistance) Act 1999.
General rule - actual determination of entitlement must have been made
(2) You are only entitled to child care benefit for the care if you are so entitled because of a determination made under section 51B or 52E of the A New Tax System (Family Assistance) (Administration) Act 1999. The amount of your entitlement to child care benefit for the care is the amount worked out under that Act by reference to that determination.
Entitlement based on fee reductions under a determination of conditional entitlement
(3) However, if:
(a) a determination (the conditional determination ) has been made under section 50F of the A New Tax System (Family Assistance) (Administration) Act 1999 that you are conditionally eligible for child care benefit by fee reduction for the care; and
(b) under section 219A of that Act as it applies in relation to the determination, fees for the care have been reduced;
you are, subject to subsections (4) and (5), taken to be entitled to child care benefit for the care. The amount of your entitlement to child care benefit for the care is the amount of the reduction.
(4) Despite subsection (3), if:
(a) a determination (the final determination ) is subsequently made under section 51B of the A New Tax System (Family Assistance) (Administration) Act 1999 of your entitlement to be paid child care benefit by fee reduction for the care; and
(b) the amount (the final determination amount ) of your entitlement to child care benefit for the care, as worked out by reference to the final determination, differs from the amount of the reduction referred to in paragraph (3)(b);
the amount of your entitlement to child care benefit for the care is taken to be, and always to have been, the final determination amount.
(5) Despite subsection (3), if a determination is subsequently made under section 51C of the A New Tax System (Family Assistance) (Administration) Act 1999 that you are not entitled to be paid child care benefit by fee reduction for the care, you are taken not to be, and never to have been, entitled to be paid any child care benefit for the care.
Entitlement does not end with receipt
(6) In applying this Act at a particular time in relation to yourself and the care, the fact that you have, by that time, received some or all of your entitlement to child care benefit for the care does not mean that you are no longer to be regarded as being entitled to child care benefit for the care.
Later determinations, variations and substitutions to be taken into account
(7) If, after applying this Act at a particular time in relation to yourself and the care, a determination mentioned in this section is made or varied, or is set aside and a new determination substituted, the question of your entitlement to child care benefit for the care is to be redetermined taking account of the making, variation or substitution.
Amount of the child care tax offset
61-485 Amount of the child care tax offset
The amount of your *tax offset for a child care offset year is worked out in this way:
Method statement
Step 1. For each child in relation to whom you are entitled to the *tax offset for the child care offset year, work out amounts in accordance with steps 2, 3 and 4.
Step 2. Work out the total amount of your *approved child care fees for the child in each *child care base week for you and the child in the child care base year.
Step 3. Work out the total amount of your *entitlement to child care benefit for *approved child care for the child in each *child care base week for you and the child in the child care base year.
Step 4. Work out the lesser of the following amounts (the child offset ) for the child:
(a) the amount worked out using the formula:
30% * (Step 2 amount - Step 3 amount)
(b) the *child care offset limit for the child care base year.
Step 5. Total the child offsets for each of those children. The result is the amount of your *tax offset for the child care offset year.
61-490 Component of formula - approved child care fees
General rule - approved child care fees for a child care base week for you and a child
(1) The amount of your approved child care fees for a child for a *child care base week for you and the child is the amount of fees for *approved child care for the child during the week that are incurred by:
(a) you; or
(b) your partner, within the meaning of the A New Tax System (Family Assistance) Act 1999, during the week.
Subject to subsection (2), it does not matter whether you are *entitled to child care benefit for all of that care.
Special rule if the week is also a child care base week for your partner and the child
(2) If the *child care base week is also a child care base week for your partner and the child, your approved child care fees for the week do not include any fees incurred by your partner for *approved child care, for the child in the week, for which you are not *entitled to child care benefit.
If fee reduction applies, count unreduced amount of fees
(3) If fees for *approved child care have been reduced under section 219A of the A New Tax System (Family Assistance) (Administration) Act 1999, then for this section, a reference to the fees incurred for the care is taken to be a reference to the fees that would have been incurred for the care if they had not been so reduced.
61-495 Component of formula - child care offset limit
(1) The child care offset limit for the 2004-2005 child care base year is $4,000. The limit is indexed annually.
Note: Subdivision 960-M shows you how to index amounts.
(2) In applying the indexation formula in subsection 960-275(1) to determine the child care offset limit for the 2005-2006 child care base year or a later child care base year, the relevant financial year is the child care base year rather than the child care offset year for which the offset is being calculated.
Transfer of entitlement to unused balance of child care tax offset
61-496 Entitlement to transfer
(1) This section applies if the amount of *tax offset for a child care offset year to which you are entitled under section 61-470 exceeds the amount of income tax that you would have to pay for the year if:
(a) you had not got the tax offset; and
(b) you had not got any tax offsets that are of a higher priority under subsection 65-25(2).
(2) You may transfer your entitlement to so much of the *tax offset as is equal to the excess to an individual who was your *spouse on the last day of the child care offset year, subject to subsection (5).
(3) If you make a transfer:
(a) the transferee is entitled to so much of the *tax offset for the child care offset year as is equal to the excess; and
(b) you are no longer entitled to so much of the tax offset as is equal to the excess.
(4) A transfer cannot be revoked.
(5) If you die during the child care offset year, the reference to your *spouse in subsection (2) is taken to be a reference to your spouse just before your death.
61-497 Form of transfer
(1) A transfer has effect only if it is in the *approved form.
(2) The *approved form must require the inclusion of:
(a) your *tax file number; and
(b) the tax file number of the transferee; and
(c) the transferee's signed consent to:
(i) the transfer; and
(ii) the disclosure of his or her tax file number in the form.
(3) Subsection (2) does not limit what may be required by the *approved form.