What the New Child Subsidy Means For You

If you’re assessing your child care options for next year, now is the time to find out how the Government’s child care package will work for your family. The key objective when the Commonwealth Government Child Care Subsidy (CCS) was introduced last year (July 2018) was to better support parents’ participation in the workforce. While the CCS has improved the financial position of many families, the manner in which the Australian tax and transfer system works  has the effect of creating very high work disincentives for Primary Carers.

Almost one million Australian families benefit from the current package which includes an additional $2.5 billion investment in child care.

From 2 July 2018, the existing Child Care Rebate and Child Care Benefit will be replaced by a single Child Care Subsidy. There are three factors that will determine how much Child Care Subsidy you can receive:

Your combined family income

How much your family earns will determine the percentage of subsidy you are eligible for.

Child Care Subsidy GraphIf your family earns $185,710^ or less per year there will be no annual cap on the amount of subsidised child care you can claim. If your family earns between $185,710^ and $350,000^, the current annual cap of $7,613 will be lifted to $10,000^ per child, per year.

The activity level of parents

The amount of subsidy you receive will also depend on the amount of ‘recognised’ activity you do. The Government will recognise a range of activities, including: paid work, parental leave, unpaid work in a family business, actively looking for work, studying and volunteering.

The more activity you do, the more hours of subsidised child care you can access, up to a maximum of 100 hours per fortnight. If you don’t meet the activity test and your family earns $65,710^ or less a year, you will be able to access up to 24 hours of subsidised care per child per fortnight.

The type of child care service your family uses

An hourly rate cap will be used to determine the amount of subsidy your family receives. This rate cap will be based on the type of child care service your family uses:

Families using centre-based day care services will have an hourly rate cap of $11.55. Centre-based day care services deliver child care in a building or centre, and typically provide longer sessions of care from morning to evening. Long day care and occasional care will also be recognised as centre-based day care as part of the Child Care Subsidy.

Families using a family day care service will have an hourly rate cap of $10.70. Family day care providers deliver flexible home-based child care by registered child care educators. Family day care services are ideal for parents who want their children to learn and play in smaller groups in a home-like environment.

Families using outside school hours care will have an hourly rate cap of $10.10. Outside school hours care services operate before and after school and/or during school holidays. This service type works well for parents with primary school aged children who need care outside school hours.

What to do now?

Families don’t need to do anything at the moment, but you can use the Family Child Care Subsidy Estimator now to get an idea of how much subsidy you might receive. It doesn’t record your details, so you can try different options such as working more hours or using a different service type to see what may work best for your family.

^ These figures will be increased by the Consumer Price Index (CPI) when the package begins in July 2018.