Is a nanny tax deductible

“Is a nanny tax deductible?” is a question we are often asked.  It’s a fair question because it could be a significant deduction at tax time.  This is one of many financial considerations to make when it comes to deciding whether to hire a nanny.  It’s important to understand what (if anything) can lower the financial and mental load of childcare and prioritise your needs.  

As a domestic employer, it’s important to understand the logistics that come with domestic employment.  Domestic employment can be overwhelming but NannyPay is here to help.  Book a call with our team here if you need support to set things up properly with your nanny.

Is a nanny tax deductible?

No –  As a parent managing your personal affairs, a nanny’s wages are not tax deductible.  If your nanny has a hybrid role where they manage anything in a professional or business sense, it’s best to speak directly with your accountant to explore whether there is any portion of the wage you can claim.  Alternatively, you can contact the ATO to discuss any non-personal services the nanny provides and receive guidance on your situation.  Most nannies offer personal services only, relating to care of the children and support for the family and their household, therefore their wages can not be claimed at tax time.

It’s a hot topic that often pops up in the news – parents are often asking “is a nanny tax deductible?”, and so are nannies who are eager to support families.  We hope the government will one day consider tax breaks for families employing nannies in their homes. Especially with the childcare shortage. We would support nanny care being more accessible and affordable for a wider range of families!

Can I claim the childcare rebate?

No – The childcare rebate is only available to be claimed at a Childcare Centre or Family Day Care Centre.

The only potential government contribution for nannies is the In-Home Care Subsidy which is available through selected providers for some families to subsidise a nanny/in-home educator’s wage.  There are a few hoops to jump through for this, as you must fall under select criteria to be eligible.

Some scenarios considered are:

  • Care required outside of childcare hours (for parents who are shift workers, etc)
  • Living in certain rural locations
  • Special short-term or long-term circumstances (such as a family member with a medical condition, disability, or injury).

You can read more about the In-Home Care program here.  The best place to start is reaching out to your state support agency which will determine your eligibility and from there connect you to local providers.

Lately due to the labour shortage, we are hearing that some of these providers require you to find your own nanny/carer so be prepared that you may need to conduct a search too.

Taxes are tricky! 

An essential part of employing your nanny is paying their tax to the ATO.  Tax (or PAYG) installments can be lodged once you register as a taxpayer with the ATO.  To find out more on how to register to pay your nanny’s tax we recommend you talk to your accountant or call the ATO directly to understand how to set up and what your obligations are. 

Your nanny’s tax rate will be determined by their financial situation. They may have different tax rates with their Visa type or multiple income streams so when discussing rates be sure to highlight that the per hour is before tax.

When employing you will need to collect these tax preferences from your nanny via a TFN declaration form.  This is also a form for the nanny to complete should their tax preferences change.

Want us to take care of all this for you?

We get it, there are a lot of considerations to employing a nanny and it may seem as though it doesn’t offer the same tax breaks as other options.  But “is a nanny tax deductible” is not the only important question to ask yourselves as a family.  “Is a nanny right for my family?” is important too.  The support a nanny can provide in your home may be well worth the cost difference. 

The complicated nature of domestic payroll is how NannyPay was born!  With our services, we take care of your domestic employer obligations for you so you can set up and pay your nanny on autopilot.  Allowing you and the nanny to focus on establishing a wonderful working relationship that works for you.

Go on, let us take care of this for you.

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Melbourne-based, servicing Australia-wide across Sydney, Brisbane, Adelaide, Perth and beyond. 

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