Here’s an idea that could help to achieve two things that the government wants for the early childhood sector:

1. Not to increase fees to parents when government funding to services with 80% or more registered teachers is cut from February next year, and
2. To reduce bureaucracy, unnecessary paper work, and reduce the costs of compliance. 

The idea comes from HP Luthera who writes:

“The early childcare sector should have exemption from GST like residential house rent. It will give big relief to working parents who do not receive any funding. ChildForum should seek views and pursue.”

This idea has merit.

Overseas parents don't pay GST on childcare in Australia (see information below)

But in NZ GST is included in the funding subsidies and grants that early childhood services receive from the Ministry of Education and the fees charged to parents include GST.  Early childhood service owners and managers often ask why GST is included in the funding received as it simply means more paper-work and can’t be treated as income because they are collecting it to pay to the IRD.

Many early childhood services are facing the prospect of reduced government funding of between 3 – 6% next year along with meeting escalating costs for things such as electricity and teaching equipment.

Charging parents more is not something that the government wants early childhood services to do. But on the other hand many early childhood services are aghast at the thought that their only other main option would be to reduce staffing costs by shedding one or more of their qualified and registered teachers.

Looking at the profit reports for a small sample of early childhood services and recalculating these on the basis of GST exemption, we think the idea of GST exemption is worth exploring further. Services are likely to better off financially if fees and grants are made GST exempt, but only under certain conditions. Below we provide examples of what the likely financial implications would be for three services and how much better off they would each be. 

But first, here are HP Luthera’s arguments for GST exemption:

Please Login with your username and password to see the full article and read and add comments.  Access is only available to current members. 

To renew your membership or for information about joining our fabulous Network and becoming a member click here