Be Tax Smart with Your Child Care Tax Return!


Most industries dont get a “get out of jail free card” – but Family Day Care owners sure do when it comes to being able to deduct costs associated with the home.

The general rule is that costs associated with your home, for example mortgage interest, council and water rates and land taxes are deemed to be private expenses and are therefore not deductible for taxation purposes.  However, if your home qualifies as a “place of business”, you will be able to claim both occupancy costs and running costs.

Whether you rent your home or own it and carry on a family day care business;  it is practically a given that your “place of business” is your home. Your home (or at least a portion) however needs to be the “sole base of operations” from which you carry on your family day care business.

Costs associated with your home will then be deducted according to a percentage. This is know as a “deductible percentage”. A Common method used to calculate the deductible percentage includes the size of the floor area that is approved for family day care by your family day care scheme divided by the total size of your home (“the approved area”).

You would also then need to multiply the approved area by the percentage of TIME that the approved area is used for family day care.  This is generally calculated using the opening hours of the family day care business over the total time in a week.

We refer to the combination of the two calculations as a TIME / SPACE formulae.

Note: As per Taxation Ruling TR 93/30; occupancy costs can only be deducted for “the area of the home which is used exclusively or almost exclusively for income producing purposes”. Running costs can however be deducted for activities that result in additional expenditure to produce the family day care fee income and will be based on the approved area to run your family day care.

The deductible percentage for occupancy costs might therefore be different to the percentage used for running costs. 

The above are thought provoking suggestions only and should not be construed as advice. Please contact us to discuss your specific circumstances as deductions on a home could give rise to capital gains tax.

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