What you need to do to get ready for the new Child Care Subsidy

What you need to do to get ready for the new Child Care Subsidy

The single Child Care Subsidy takes effect on 2 July, completely replacing the existing Child Care Benefit and Child Care Rebate.

To ensure parents and carers continue to receive financial support for the cost of early childhood education and care services under the new system they must apply online. 

It is important to note that families using child care services will NOT automatically be transitioned to the new system, and all families wishing to access the Child Care Subsidy need to log in and complete an online Child Care Subsidy assessment through their My.Gov.au account. 

The assessment asks families to confirm current details and provide information on:

Expected combined family income - Under the Child Care Subsidy, the percentage of subsidy a family receives will be based on their combined annual income, with more financial support available to lower income families.

Activity levels of parents – The activity level of parents (including working, training, volunteering or actively looking for work) has an impact on the amount of subsidy a family is eligible to receive.

Types of child care service being used – the type of child care a family uses affects how much subsidy a family is eligible for. 

Remember, you need to log in and complete an assessment by 2 July, otherwise you may not receive any assistance with your child care fees. The new Child Care Subsidy will be paid directly to child care services on behalf of families and passed on to families as reduced fees. 

Avoiding over payment

The Child Care Subsidy reduces the amount of child care fees payable throughout the year, based on a family’s estimated annual income. It’s important to keep in mind the fact that the final Child Care Subsidy entitlement won’t be confirmed until the end of the financial year, when a family’s actual taxable income is known, after a tax return is completed and submitted. 

Centrelink and the Department of Education are encouraging families to be as accurate as possible in their estimations to reduce the likelihood of overpayment.  

In addition, to help families avoid an end of year debt Centrelink will withhold a portion of Child Care Subsidy each fortnight. This means that families pay a little extra to their child care service as fees paid during the year. Following reconciliation, any outstanding amounts owed will be paid back to families as a lump sum. 

The default withholding amount is 5 per cent, however, families can request a higher withholding rate if they are concerned that their actual income at the end of the financial year is likely to be higher than their estimate.

Why the hourly rates?

Most families are used to being charged a day rate by their child care service and the hourly rate may seem a bit strange at first! One of the main reasons the government is paying the subsidy as an hourly rate is to encourage child care services to offer a more flexible approach to education and care services, through the provision of sessional care (e.g. morning and afternoon only care) and casual spots. 

If your service charges a daily fee, the hourly rate will be determined by dividing the daily fee by the hours the service operates. For example, if your service is open for 11 hours and charges $115.50 per day then the hourly rate is $10.50 ($115.50 divided by 11).

The Department of Education will ask child care services to report on standard session fees and length and will use the hourly rate cap to calculate how much to pay.

Remember, the Department of Education is not requiring child care services to change their billing practices or to start charging families by the hour, so you may not notice any difference in how your child care bill looks. 

For lots more information visit the Department of Education website or read the FAQs.

This child care article was last updated on Friday, 7 December 2018



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