You run a childcare centre. You look after children every day. You have staff to pay. You have rent, food, toys and other expenses. Then you start looking at your GST obligations.
And you ask: “Do I need to charge GST to the parents?” This is an important question. The good news is that eligible childcare services can be GST-free. But, as always with GST, the details matter. Not everything a childcare business does is automatically GST-free.
So let’s make it simple.
Are Childcare Services GST-Free?
Certain childcare services are GST-free when the relevant requirements are met. This means you generally don’t charge GST to the parent or guardian.
For example: Childcare fee: $1,000.
GST: $0.
Total: $1,000.
You don't add another $100 GST to the fee.
This can apply to childcare services provided by an eligible childcare provider.
What Is a GST-Free Childcare Service?
The GST rules can treat certain childcare services as GST-free when they are provided by an eligible provider and meet the relevant requirements. This can include childcare provided through approved childcare services.
The important point is: The childcare service needs to qualify under the GST rules. Simply calling something a “childcare service” does not automatically make it GST-free.
What About an Approved Childcare Centre?
If you operate an approved childcare service, the childcare services you provide can generally be GST-free when the requirements are satisfied.
For example, your centre charges a parent: Weekly childcare fee: $500.
If the service qualifies as GST-free: Childcare fee: $500.
GST: $0.
Total: $500.
The parent pays $500.
You don't add 10% GST to the childcare fee.
What About Before and After School Care?
Before-school and after-school care can also fall within GST-free childcare treatment when the relevant requirements are met.
For example, you provide eligible outside-school-hours care. You charge: $100 per week. If the service qualifies: GST: $0. Parent pays: $100. But childcare businesses can provide many different services. So don’t assume every additional charge is automatically GST-free.
What About Vacation Care?
Vacation care can also qualify for GST-free treatment when it is provided as part of an eligible childcare service and the relevant requirements are satisfied.
For example: Vacation care fee: $300.
GST: $0.
Total: $300
The important thing is to check whether the service is actually covered by the GST-free childcare rules.
What About Extra Charges?
This is where childcare businesses need to be careful. A childcare centre may charge parents for things such as:
- Meals.
- Excursions.
- Activities.
- Late fees.
- Transport.
- Special programs.
- Other additional services.
You should not automatically assume every charge has the same GST treatment as the childcare service itself. Some amounts may be part of the childcare service. Others may be separate supplies. The GST treatment depends on the circumstances.
What About Meals Provided to Children?
Food can have its own GST rules. But when meals are provided as part of an eligible childcare service, you need to consider whether the meal is part of the overall childcare supply. Don’t simply look at the food by itself.
For example, a childcare centre may provide lunch as part of the daily childcare service. The GST treatment may be different from a restaurant selling the same meal directly to a customer. The nature of the overall supply matters.
What About Excursions?
Imagine your childcare centre takes children on an excursion. You charge parents: Excursion fee: $50. You should consider whether the excursion is part of the childcare service or a separate supply. If it forms part of the eligible childcare service, the GST treatment may follow the childcare service.
But if it is a separate service or charge, the treatment may need to be considered separately. This is why keeping your invoices and records clear is important.
What About Transport?
Some childcare centres provide transport. For example: Pick-up from school. Drop-off at childcare. Transport for children attending the service. The GST treatment can depend on whether the transport is part of the childcare service or a separate supply.
So don’t simply assume: “Transport = taxable.” And don’t automatically assume: “It’s childcare = GST-free.” Look at how the service is structured.
What About Late Fees?
Late fees can be a little different. For example, a parent arrives late to collect their child. The centre charges: Late collection fee: $30 You should consider the GST treatment of the fee separately. Don’t simply assume that every amount appearing on a childcare invoice is automatically covered by the GST-free treatment.
What About Childcare Subsidy Payments?
Childcare businesses may receive payments connected with government childcare assistance arrangements. The GST treatment can depend on the nature of the payment and the underlying childcare service. The important thing is to make sure your accounting records correctly identify:
Parent payments, Government-related payments, Other income. This makes your GST reporting much easier.
Can a Childcare Business Claim GST Credits?
Yes. This is one of the important benefits of GST-free treatment. A business that makes GST-free childcare supplies may still be able to claim GST credits on eligible business purchases.
For example, your childcare centre buys furniture for: $11,000 including GST.
The GST component is: $11,000 ÷ 11 = $1,000.
If the purchase is eligible, you may be able to claim the $1,000 GST credit.
So:
Childcare service: GST-free.
Eligible business purchase: GST credit may still be available.
This is different from an input-taxed activity.
What About Rent for the Childcare Centre?
Your childcare centre needs a building. You pay rent. The GST treatment of the rent depends on the lease and the property. If the landlord charges GST on the commercial rent, the childcare business may be able to claim the GST credit if the expense is creditable and the relevant requirements are met.
For example: Commercial rent: $5,500 including GST. GST: $500. The centre may potentially claim the $500 GST credit. But always check the lease and the tax invoice.
What About Staff Wages?
Childcare centres have employees. You pay: Educators, Administrators. Centre managers, Support staff. There is no GST on employee wages. So you cannot claim a GST credit on wages.
For example: Employee wages: $20,000.
GST: $0.
GST credit: $0.
Payroll tax and superannuation are separate matters. Don’t confuse them with GST.
What About Toys and Learning Materials?
A childcare centre can spend a lot on toys and educational materials.
For example, you buy: Toys and equipment: $2,200 including GST.
GST included: $200.
If the purchase is for the business and the other requirements are satisfied, you may be able to
claim the $200 GST credit.
The fact that your childcare services are GST-free does not automatically prevent you from claiming GST credits.
What About Selling Products to Parents?
This is another area where you need to be careful. Imagine your childcare centre sells: Uniforms, Bags, Water bottles, Books, Other merchandise. These sales may have different GST treatment from the childcare service itself.
For example:
Childcare fee: GST-free.
Uniform sale: May be taxable.
So don't use the same GST code for every transaction.
A Simple Example
Imagine your childcare centre has: Childcare fees: $50,000. Uniform sales: $5,500 including GST. Other taxable sales: $1,100 including GST.
The childcare fees may be GST-free if the requirements are met.
The taxable sales contain: $5,500 ÷ 11 = $500 GST and $1,100 ÷ 11 = $100 GST.
Total GST collected: $600.
Your accounting system should clearly separate the GST-free childcare income from taxable sales.
What If the Childcare Business Provides Other Services?
Some childcare businesses also offer:
- Tutoring.
- Holiday programs.
- Workshops.
- Photography.
- Transport.
- Events.
- Merchandise.
Not all of these are automatically covered by the GST-free childcare treatment. Each service should be looked at separately. This is especially important if your business is growing and adding new income streams.
A Common Mistake
One common mistake is: “We are a childcare centre, so everything we charge is GST-free.” Not necessarily. Your core eligible childcare services may be GST-free. But additional products and services can have different GST treatment. So don’t mark every transaction as GST-free without checking.
Another Common Mistake
Another mistake is thinking: “Our childcare services are GST-free, so we can’t claim GST credits.” This is also not correct. GST-free and input-taxed are different. If your business makes GST-free supplies, you may still be able to claim GST credits on eligible purchases.
So keep your purchase invoices. Record the GST. And claim eligible credits correctly.
A Simple Checklist
If you run a childcare business, ask:
1. Is the childcare service an eligible GST-free service?
2. Is the provider approved or otherwise eligible under the GST rules?
3. Are additional charges part of the childcare service?
4. Are you selling any separate products?
5. Are you providing transport or other services?
6. Are your GST-free and taxable sales recorded separately?
7. Are you keeping proper tax invoices for your purchases?
8. Are you claiming GST credits only on eligible expenses?
These simple checks can help keep your BAS accurate.
The Bottom Line
Childcare services can be GST-free when the relevant requirements are met. This generally means you don’t charge GST to parents for those qualifying services. But don’t assume everything your childcare business does is automatically GST-free. Extra charges, transport, merchandise and other services can have different GST treatment.
At the same time, your business may still be able to claim GST credits on eligible purchases. So keep your records clean. Separate your different income streams.Use the correct GST codes. And check the treatment whenever you introduce a new service. Because when you are busy looking after children, the last thing you need is to spend your time fixing GST mistakes that could have been avoided in the first place.