Private ruling: Child Care Expenses
Date of advice: 18 January 2016
Published: March 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you able to claim a deduction for the child care expenses you incur when you have to travel for work? | A1: No.

Relevant facts and circumstances: You are a single parent with children. Your employer will require you to travel away from home in relation to your employment. You have no family members to care for your children while you're away. You have to pay for your children to be placed in child care. You receive benefits for a portion of the child care expenses.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or a provision of the taxation legislation excludes it. The deductibility of child care expenses was examined in the court case Lodge v. FC of T (1972) 128 CLR 171; 72 ATC 4174; 46 ALJR 575; 3 ATR 254. In that case, the taxpayer worked under contract from home. To enable her to carry out her duties effectively, she sent her child to a child nursery. The court held that although the expenditure was incurred for the purpose of earning assessable income and it was an essential prerequisite of the derivation of that income, nevertheless, because it was not incurred in the course of carrying out the taxpayer's duties, it was not relevant or incidental to the production of her assessable income. In addition, the expense was considered to be both private and domestic in nature. In your case, you are not entitled to a deduction for the cost of placing your children in child care while away for work. Even though incurring the expense enables you to earn assessable income, in the sense that you can undertake paid employment, the expense is not incurred or directly related to how you carry out your employment duties. The expenses remain domestic and private in nature and therefore not deductible.