Probably one of the most used areas of your house for day care is either your front and/or back yard. This
fact sheet is designed to give you a basic overview of:
- They types of expenses you may be able to claim; and
- The circumstance / criteria you need to meet in order to be able to claim the expenses outlined.
The types of expenses you may be able to claim
Some of the types of expenses you may be able to claim include:
- Repairs
- Improvements
- Lawn Mowing and General Ground Maintenance
Repairs
You can claim the cost of repairs on outdoor items damaged by the children or by the parents of the
children in care. This may include repair of fencing, replacement of plants and shrubs, damage to driveways
as a result of increased traffic or other applicable items. Where the expense incurred is considered a
repair you are entitled to a tax deduction for all costs incurred in the applicable financial year to the
extent the expense relates to day care.
It is important to note however, that a repair is a replacement or restoration of an item and not an
improvement. For example, if you have a wooden fence or gate that was damaged by children. In order
for it to be classed as a repair you can only repair/replace the applicable item with the same or similar
wooden materials. If you were to replace the fence or gate with material such as steel or colour bond then
this would be considered an improvement. If the work is considered an improvement you will need to
calculate your claim differently.
Improvements
If the expenses you incurred are considered an improvement, you may still be entitled to a deduction,
however you must depreciate the cost of the improvement. This will generally be at a rate of 2.5% per
annum. You should also note that an improvement will only be deductible if it relates to a separate area set
aside for day care purposes only. We have outlined the criteria of a separate area in an example on page 2
of this fact sheet.
Lawn Mowing and General Ground Maintenance
Ground Maintenance relates to expenses incurred for lawn mowing, weeding, planting and general
maintenance of your garden and surrounds. As mentioned previously any repair is deductible, however
improvements and maintenance can only be claimed where it relates to an area which has been
separated for Family Day Purposes and not for your general garden and surrounds which you and/or your
family regularly use for private purposes.
The fact that children may use an outside area does not automatically make an expense deductible. As a
result, before you make a claim for any of these types of expenses on your house it is important for you
determine whether your play area falls within the tax office criteria as being a separate area for day care
purposes.
What is a separate area?
The tax office has a taxation determination (TD 93/21) which deals specifically with the issue of fences used
by Family Day Care Carers. The most important point this ruling makes is that a fence will generally be
considered private and not deductible unless there is a self contained area set up and used solely for family
day care. Subsequent correspondence from the ATO also confirms this approach in relation to claiming
general ground maintenance.
Example 1
Sarah is a Family Day Care Carer who uses her back yard regularly for games, art & craft and other day care activities. Sarah
has a wooden fence around her entire backyard which is getting quite old and needs to be replaced to ensure it remains a
safe play environment for the children. As she needs to replace her fence she decides to do a complete renovation of her
back yard.
As well as replacing her entire back yard fence with a new colour bond metal fence, she installs a swimming pool for her family
(and for use by day care children where permissible), a small soft fall area and a sand pit. As it was getting near the end of the
financial year, Sarah thought she would pay up front for all the fencing (including the pool fencing) before it had been installed
because she wanted a tax deduction so soon as possible. However, when Sarah was speaking to her Scheme about
her plans, she was informed that she needed a more expensive type of fence for her pool which would cost an additional
$500.00. Sarah had no other choice so she changed her order with the fencing company and paid the additional amount.
About two months later, all the work is finally completed. Sarah and her family are extremely happy and because the backyard
is now more secure Sarah’s family surprise her with a new pet dog. Her family have wanted a pet dog for some time and
Sarah has mentioned on a few occasions that she would like to incorporate a pet into her day care activities.
Once again after talking to the scheme, she is informed that she needs to construct a fence or install something to separate
the dog from the day care children. Sarah has to make a decision about how she will separate the dog away from the day
care children, while at the same time ensuring the dog is not separated from the rest of the family. She decides the best solution
is to construct a fence to separate the play area completely from the rest of the backyard along with a separate entrance
so that the children cannot obtain access to the family’s backyard where the dog is kept. This way the dog can have some
room to run around and her family can be free to go and play in the yard with the dog or go to the pool without having to
worry about the day care children.
In the example, the following expenses are likely to be deductible / Non– deductible for Sarah:
- The cost of the new section of fence that was constructed specifically to separate the day care area from the main back yard where the dog is kept
- The soft fall padding
- Sand Pit Construction
- Maintenance costs such as lawn mowing, weeding and repairs to the children’s separated play area.
- Maintenance costs such as lawn mowing, weeding and repairs to the children’s separated play area.
- Repairs to other areas of the back yard caused by Children
- The cost of fencing the entire back yard;
- Any costs in relation to construction and maintenance of the pool, including the additional $500.00 paid for the more expensive fencing materials; and
- Maintenance costs such as lawn mowing and weeding of the main back yard area where the pet dog is kept.
Prepared by:
Child Care Accounting
Contact us Phone: 1300 785 702
Email: info@childcareaccounting.net.au
Web: www.childcareaccounting.net.au
