Common GST categories
Child care
Child care is GST-free when it is an approved service under the family assistance law, while other child care arrangements can be taxable if the provider is registered for GST.
Child care is a common category where GST depends on the type of service. Care that meets the requirements under the family assistance legislation is GST-free. This includes approved child care services such as long day care, family day care, outside school hours care and similar services, provided the service meets the conditions that allow families to receive child care subsidy.
The reason this matters is that the GST-free treatment follows the approval status of the service. A centre that is approved can supply its care GST-free. A service that does not meet the requirements, such as a private arrangement that is not approved, may be a taxable supply if the provider is registered or required to register for GST. Families should therefore not assume that all child care is exempt.
For a child care provider, GST-free treatment means that the fees charged to parents do not include GST, yet the provider can still claim credits for the GST in its costs, for example on food, equipment, furniture and rent. This is better than an input-taxed treatment, which would remove those credits. Providers should therefore claim credits where a purchase relates to their GST-free care and they hold tax invoices.
Many centres also make other supplies that may not be GST-free. These could include extra services such as optional excursions, uniforms, photography, or hire of the premises. They need to be reviewed individually. Some may be part of the child care and treated as GST-free, while others are separate taxable supplies. If a centre makes any taxable supplies, it counts them towards GST turnover.
A common misunderstanding is that a nanny or babysitter is exempt from GST by default. If the nanny is operating as a business and is registered, the supply may be taxable if it is not approved care. Individuals who are employees are outside this as they are not making supplies as a business. Another confusion is mixing up the child care subsidy with GST. The subsidy is a government payment to the family or provider and has its own rules.
If you operate a child care business, record the approval status of each service, check how fees, subsidies and extras are reported, and talk to a professional about unusual arrangements. This page is general information only, so confirm your position with the ATO or a registered tax professional.
Worked example
An approved long day care centre charges $110 per day for care, which is GST-free, and a $22 optional photo package including GST. In a week with 100 child-days of care and 20 photo packages, sales are $11,000 GST-free and $440 taxable. GST included in photo sales is $440 / 11 = $40, which is the GST payable. The centre can still claim credits on its purchases.
Practical tips
- Check that your service is approved under the family assistance law before treating fees as GST-free.
- Review extras such as photos, uniforms and excursions separately, as these may be taxable even if the care itself is GST-free.
- Parents should ask providers to separate care fees from optional extras on invoices, so each is clearly treated.