Employer supported childcare has been well documented as a key way to attract and keep skilled staff. It takes away the hurdle of finding close and affordable childcare when returning to work after parental leave.   

Benefits of on-site childcare for children include ability to see their parents during the day, to share more easily and personally what they are learning and doing, and continuation of breastfeeding if breastfed prior to starting childcare.

And as Christchurch's February earthquake has shown it can be stressful for parents and children who are separated and can not easily and quickly reach each other in times of emergency.  

However most childcare in New Zealand is not subsidised by employers or provided in services operating from the workplace.  

Dr Sarah Farquhar of ChildForum says that there is no excuse for early childhood education services not leading by example and providing subsidised or free childcare for their employees on-site.   

"There shouldn't be a single preschool, daycare or kindergarten that does not demonstrate an ethic of care by allowing and supporting staff to bring their children to work with them," says Farquhar.

"By providing childcare for staff children employers are caring for their staff and creating a very natural sense of family and community."

And it looks like there are no tax disincentives to early childhood education  services doing just this.

The law as it stands specifically exempts from fringe benefit tax any childcare benefit supplied to the employee on the employer's premises. 

The value of childcare provided in the early childhood centre an employee works in is not taxable to the employee and FBT is not payable by the employee.

The provision of the childcare facility by the employer does not come within the Act's definition of 'monetary remuneration'.

Says Farquhar, "If the government wanted to effectively increase child  participation in early childhood education it might want to look at promoting employer-supported childcare across all industries.  It might also want to do a check on the extent to which ECE employers provide family-friendly workplaces and meet employee childcare needs."

THE DETAILS

Section 336N(1) of the Act defines "fringe benefit" to include "any benefit of any other kind whatever, received or enjoyed by the employee." Where an employer pays or has a liability to pay for the childcare provided to an employee's children, the employer must pay FBT on that benefit. Where the cost of the childcare is paid to the employee by way of reimbursement, the amount of the reimbursement will be taxable in the hands of the employee, so the employer must deduct PAYE from the reimbursement.

Where childcare facilities are provided by an employer on the employer's premises, the value of that childcare is not taxable to the employee, neither is FBT payable by the employer. The provision of the facility by the employer does not come within the definition of "monetary remuneration" so it is not taxable to the employee. Section 336N(1)(n) specifically exempts from fringe benefit tax any benefit supplied to the employee on the employer's premises.

Read more about the premises exemption in Inland Revenue's Tax Information Bulletin Volume 5 No.4 August 1993