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Important

We say we want more women back in the workforce. We talk about productivity, skills shortages and cost of living pressures. Yet one of the biggest barriers to working remains completely non-deductible from a tax perspective: childcare costs.

Let’s call it how it is.

We say we want more women back in the workforce. We talk about productivity, skills shortages and cost of living pressures. Yet one of the biggest barriers to working remains completely non-deductible from a tax perspective.

Childcare costs.

Daycare. Preschool. Before and after school care.

For many families, once they do the maths, it simply does not stack up.

The Numbers Tell the Story

Women’s workforce participation in Australia is sitting around 63.5 percent as at early 2025. That is positive.

But only about 39.6 percent of women are in full-time roles.

When you look at why women are not working or not working more hours, childcare consistently comes up as the key barrier. ABS data shows that for women unavailable to work, caring for children is one of the main reasons. For those with children under 15, it becomes the dominant factor. Separate research indicates around 38 percent of women wanting to increase hours or return to work nominate childcare as the primary obstacle.

This is not about a lack of ambition.

It is about cost.

When childcare absorbs most of the additional income earned, families quite rationally decide it is not worth the disruption.

That is not just a household decision. It is a national productivity issue.

What We Are Missing Out On

When women remain out of the workforce longer than necessary, the impact compounds.

We Lose:

• Household income that could strengthen family finances
• Income tax revenue that would otherwise be collected
• Superannuation contributions that never get made
• Skills that fade in a fast-moving economy

The Super Gap Is Real

The superannuation gap highlights the long-term effect.

Average super balances sit at roughly $182,000 for men and about $146,000 for women. By ages 60 to 64, men average just over $400,000 in super, while women are closer to $318,000. That is a gap of more than $80,000.

Among people in their late 30s and early 40s, women already have materially lower balances than men of the same age.

This gap is not random. It tracks directly with:

• Time out of the workforce
• More part-time work
• Lower lifetime earnings
• Lower super contributions

If childcare cost is a key barrier to returning to work, then it is clearly part of this story.

From a Tax Perspective: The “Nexus”

The ATO’s test for deductibility comes down to one concept: nexus.

Is there a direct link between the expense and the income-producing activity?

Tools of trade can qualify because they are required to do the job. If you cannot perform the work without them, there is a clear connection to earning income.

Now apply that logic to childcare.

If a parent cannot go to work without placing their child in care, there is a clear connection between that expense and their income.

Without childcare, many parents simply cannot work. That looks very much like an income-enabling expense.

This Is Not About Handouts

This is not about creating another welfare payment.

It is about recognising childcare as an enabling cost of earning income.

If more parents work:

• Household incomes increase
• Super balances grow
• Tax revenue increases
• Skills remain current

That is not a short-term cost. It is a long-term economic gain.

The Policy Reform That Makes Sense

If we are serious about workforce participation and closing the gender super gap, we should:

• Make childcare fully tax-deductible, including daycare, preschool, and before and after-school care
• Allow the deduction to be claimed by whichever partner it is most tax-effective for
• Treat it like any other legitimate income-enabling expense

This is a structural reform, not a token measure.

TC’s 2 Cents

Childcare costs are one of the biggest practical barriers keeping women out of the workforce.

When that happens, we lose income, super, skills and tax revenue.

From a tax policy standpoint, there is a strong argument that childcare satisfies the nexus test. It directly enables income-earning activity.

If we genuinely want a productive, well-functioning economy, we should make it easier for parents who want to work to do so.

I would be interested in your view. Is this a reform that moves the dial, or is there something policymakers are overlooking?

Disclaimer: This article provides general information only and does not take into account your personal circumstances. It is not financial or tax advice. You should seek independent advice from a qualified professional before making decisions about tax, legal or financial planning matters, along with loan structures or entity structure.