DETI – Domestic Employment Tax Incentive

Stuart Miles at Free Digital

As an ex-accountant, one of the first things I do when evaluating any idea, is look at the numbers – that’s just how I see things.

But once that’s done, I also look at a whole raft of other implications, such as health, mental, social implications etc. And then I bear in mind that just because I see something as being a great idea on the whole, it doesn’t mean others will. Sometimes I think I’m the only one in the world who thinks the way I do, and I still can’t decide if that’s a good thing or bad!

So when I sent off an outline of my ‘Domestic Employment Tax Incentive’ (DETI) to a party leader a few years ago, I was both surprised and not surprised when it was not seized with both hands! And why am I bringing this up now? Because of an article in this week’s Sydney Morning Herald by Carmen Michael regarding the idea of a tax rebate for nanny care, as opposed to accredited family and centre-based child care.

Ms Michael’s article has attracted some quite negative comments, but sadly these come from people who see her proposal as a ‘benefit the middle classes at the expense of the working classes’ concept. This couldn’t be further from the truth.

Despite my husband and I being on reasonable salaries when we married (approx $20k each in 1982), we delayed having children for the first seven years of our marriage because we wanted to survive on one income once we had kids – we clung to the belief that a child should be brought up by its parents, not strangers. Little did we know how much the little tackers cost until we had our first one. And no, we didn’t live anywhere luxurious – we had a three bedroom, heavily mortgaged, brick veneer home on the railway line at Toongabbie, in western Sydney. We struggled for many years until the youngest went to school and I could secure permanent part-time work to help supplement my husband’s income, because the only child care we could get was one day per week at the local centre (in the Blue Mountains, where we moved to about 15 months after the first child was born).

So you don’t have to be ‘middle class’ to need child care. Nor do you have to be a married/dedicated couple – sadly many relationships are failing and there are more single parents struggling to cope these days than ever before.

So what is the DETI?

The DETI is a tax deduction available to the taxpayer for employing DETI-registered providers, such as nannies, gardeners, cleaners, cooks etc.

  • To be a DETI-registered provider, you would have to be accredited in your field – obtain a proscribed certificate or diploma which would enable a certain level of tax deductability to your employers. 
  • Employment of a DETI-registered provider would allow the employer a tax deduction of up to 50% of the minimum award cost of employing that person on the grounds that it’s 50% a domestic benefit, but that it allows the employer the ability to earn income elsewhere.

And how will the DETI help?

  1. Many people are engaging unlicensed and unqualified people to look after their children because they can’t get ‘proper’ child care. Family Day Care schemes, where someone looks after up to five children per day in their home, have gone some way to alleviating this problem, but it’s still not enough. Allowing people to use DETI-registered nannies would broaden the options and allow people to engage their parents or siblings to look after their children. If a child can’t have its own parents look after it, then surely a close relative with the same family values and ethics would be better than a random stranger? If the parent can claim a tax benefit for ‘registered’ day care providers, then why can’t family members or friends go through a similar process to register for tax relief?
  2. Many people need more than just child care to help them with their working life. A woman I once worked with agreed with me that while our husbands were wonderful, what we really needed to be able to deliver the right amount of energy to our jobs, was a ‘wife’ (for want of a better word – feminists, please keep your hats on!!). Keep the husband, but have a ‘wife’ to do all our shopping, cleaning, washing, ironing, cooking etc so that, come the evenings or the weekends, we could actually have a decent sleep, have some R&R and recharge properly. That way, our mental health would be better, our physical health would be better, our relationships would be better … just our wallets would be worse off. And I’m sure my husband would have appreciated a gardener, maintenance man etc so that he could focus on his job and have energy left for the weekend, too!
  3. Having people register as DETI providers would increase the options for people finding it difficult to get suitable work. There are many people out there who can do a great job at cleaning – but I’m not one of them. I like a clean house, but I hate housework, and can’t really justify the expense of employing someone. But give me a tax break on it so that I can focus on doing what I do well, while someone else comes to my place and gets paid to do what they do well … you then have more people in the employment pool, paying taxes, and earning not only a living, but self-esteem – so vital for good mental health.
  4. Having people register as DETI providers would help reduce the ‘cash society’. I’m not going to employ someone I can’t get a tax break for – if they want cash then they’re going to have to sell their services to someone with a lot more money than me! I can’t afford to pay their taxes for them. So DETI providers would become the preferred employment option over cash-under-the-counter employees.
  5. DETI providers would be protected as far as minimum wages go. There would be awards to pay them under, and this would ensure that, rather than creating an ‘underclass’, those who performed a good day’s work would be paid appropriately, and employers would have the option of paying above award to encourage loyalty from those who were great at what they do. However, the tax deduction would be limited to 50% of the award wage.
  6. DETI providers could develop their skills and value and climb the award wage ladder  by undertaking accredited training courses. This would enable them to charge more, and their employers to gain a higher tax break.
  7. The DETI would also create spin-off industries, and thus more employment, of: DETI job training (I would much prefer a shopper and a cook who understands the nutritional and economic values of different foods than someone who doesn’t!), DETI employment agencies, DETI bookkeepers, DETI registration centres … the list goes on.
  8. The DETI would provide part time and casual work opportunities for people where they can fit their working life in around their own family life. For example, a mother with school aged children could earn her DETI money five hours per day while her kids were at school. Or a single father could earn his washing, shopping and cooking for another family between the hours of 4pm and 8pm while his own mother looks after her grandchildren – herself now a registered DETI provider.
  9. With so many people on various pensions, DETI income would help many pensioners supplement their income, while helping to gently reduce the government’s overall pension payout. With the lifting of age restrictions/discrimination on employment, a 70 year old grandmother who was going to be looking after her grandchildren while her son or daughter works anyway, would now get paid for it, thus reducing her pension a little bit, but also providing her with more disposable income – what goes around comes around. And yes, her child might be getting a tax break on those wages, too, but that again is more disposable income.
The point is, over 100 years ago both parents often worked, but the mothers took their children to the workhouse with them. Somewhere along the way it became acceptable for mothers to stay home with their children, and then it became expected, and I can remember, as a child in the 1970s, my mother talking, with her nose turned up, about the working mothers of my friends.

But life’s not like that anymore. We don’t all have the potential or desire to live in a McMansion, but we should all have the ability to at least spend quality time with our loved ones when we get in from a hard day’s work. If someone can cook my dinner for me and clean up and bring in my washing so that I can spend my time helping my kids with their homework or talking with my husband about how to cope with a difficult staff member, then surely that’s a better use of my time – for all of us?

And at the risk of throwing too much into this mix, the USA allows a tax deduction for home mortgage interest – yes, there are certain hoops to jump and boxes to tick – but OMG, if you can get a tax break for a passive expense such as mortgage interest on your own home, why the hell can’t you get a tax break for creating active employment?

So, Julia Gillard, Wayne Swan and Penny Wong – what do you think? The Labor Party is supposed to be about creating jobs, so how about doing just that?

4 Replies to “DETI – Domestic Employment Tax Incentive”

  1. Thanks, Royal PK – it will probably never happen, but it made sense to me. Used to live at Toongabbie many years ago – so it’s nice to connect with a former home town again. 🙂

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