This is what the report says doesn't really clear it up for me

"These barriers could be substantially reduced by treating Family Tax Benefit as income in the hands of the family’s first wageearner, and treating child care as a deduction in calculating tax and eligibility for welfare benefits. However, more work is required to identify tax and welfare changes that would reduce barriers at an acceptable cost to the budget, after taking into account increased income tax collection as a result of higher participation."

But it does say that a straightforward tax deduction would not work across the board, you would have to be a very high income earner for it to be better than current system.