Changes to child care funding: What you need to know

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  Published on Wednesday, 07 February 2018

Changes to child care funding: What you need to know

Library Home  >  Cost of Child Care
  Published on Wednesday, 07 February 2018
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It's out with the old and in with the new, because the government has announced sweeping changes to how child care funding works for families.

From 2 July 2018, there will be a New Child Care Package, consisting of a single Child Care Subsidy and the Child Care Safety Net.

The government aims to provide more assistance to low and middle-income families, and here's what the package means for all parents using early childhood education and care services.

What is the Child Care Subsidy?

In a move to simplify the current system, the single Child Care Subsidy will replace the Child Care Benefit and Child Care Rebate. It will be paid direct to the providers of early childhood services and then passed on to families as a reduction in hourly fees.

This financial support is means-tested and individually targeted, so your family’s level of Child Care Subsidy will depend on three factors:

  1. Your combined family income
  2. The activity level of both parents
  3. The type of child care service you're using

You'll also have to meet these general requirements to be eligible to receive the Child Care Subsidy:

  • Your child must be aged 13 or under and not attending secondary school
  • Your child must meet the immunisation requirements
  • Your, or your partner, must meet the residency requirements

1. What effect does family income have?

Your annual combined family income determines what percentage the government will contribute towards your child care fees; with low income families getting 85 per cent off and high-income families receiving no support.

Here is the sliding scale of subsidy available:

Total yearly family income Subsidy rate of fees charged, or the maximum hourly rate (whichever is lower)
Up to $66,958 85 per cent of fees
Over $66,958 to under $171,958 Gradually reducing to 50 per cent of fees
$171,958 to under $251,248 50 per cent of fees
$251,248 to under $341,248 Gradually reducing to 20 per cent of fees
$341,248 to under $351,248 20 per cent of fees
$351,248 or more No subsidy applies

2. What is the activity test for the Child Care Subsidy?

Parental activity is another factor that will be taken into account when calculating your family's level of Child Care Subsidy.

The activity test looks at the number of hours parents spend doing:

  • Paid work, including leave
  • Self-employed work
  • Unpaid work for the family business
  • Training for the purpose of up-skilling or improving employment prospects
  • Study or tertiary education
  • Volunteering
  • Active job-hunting
  • Paid parental leave, including maternity leave

And because the government wants to entice parents back to work with lower child care costs, the more activity you engage in, the more hours of subsidy you'll receive:

Child Care Subsidy activity test steps Hours of parental activity per fortnight Maximum number of hours of subsidy per fortnight
1 8 hours to 16 hours 36 hours
2 More than 16 hours to 48 hours 72 hours
3 More than 48 hours 100 hours

Both parents must meet the test, and where parents have different levels of activity, the subsidy hours are calculated on the lower number.

It's also worth noting that:

  • Activities can be combined, e.g. 16 hours of work and 12 hours of study;
  • The activity hours don't have to occur when your child is in care;
  • Travel time can be counted; and
  • Where parents have casual or irregular hours, their activity can be estimated over a three-month period.

Some families are also exempt from the test. Even if they clock up less than eight activity hours per fortnight, those on a low income ($66,958 or under) may be able to access 24 hours of subsidised care per child, every two weeks.

3. How does your choice of care affect the Child Care Subsidy?

The type of child care your family uses is the third factor which will determine the level of Child Care Subsidy you receive.

Depending on the service, there are three different hourly rates caps, with the government paying most generously towards centre-based day care:

Child care service type Maximum hourly rate cap
Centre-based day care (long day care and occasional care) $11.77
Family day care $10.90
Outside school hours care $10.29

To work out your family's entitlement, the hourly rate cap is combined with the subsidy percentage. So, if your child care provider charges less than the hourly rate cap, you will be paid your subsidy percentage, e.g. 50 per cent of that fee. If they charge more, then you’ll receive that percentage up to the rate cap, and will have to pay the gap.

What about the annual child care cap?

A key change with the new Child Care Subsidy is that many families won't be subject to an annual subsidy cap. This limit currently sits at $7,613 per child, but from 2 July 2018:

  • Families with a combined annual income of $186,958 or less will not have an annual cap; and
  • Those with a family income between $186,958 and $351,248 will receive an increased cap of $10,190 per child, per year.

What extra child care support will be available to families?

The New Child Care Package includes a Safety Net to ensure vulnerable children have access to quality early learning and child care. It also supports parents moving into work.

The Additional Child Care Subsidy is part of this Safety Net and will provide a top-up payment to:

  1. Families needing help to support their children’s safety and wellbeing
  2. Grandparents on income support who are primary child-carers
  3. Families in temporary financial hardship
  4. Families moving to work from income support

The first three groups will receive a subsidy equal to the actual child care fee, up to 120 per cent of the Child Care Subsidy hourly rate cap, for up to 100 hours per fortnight.

Families transitioning to work will receive a subsidy of 95 per cent of the fee charged up to 95 per cent of the subsidy hourly rate cap (for up to 12 weeks after gaining employment).
This additional subsidy replaces the Special Child Care Benefit, Grandparent Child Care Benefit and Jobs, Education and Training Child Care Fee Assistance.

What extra government support is there for child care services?

The Child Care Safety Net also supports child care providers. Eligible services can apply for supplementary funding under the Community Child Care Fund. This will help create extra child care places, make it easier for families to access child care and sustain struggling providers.

In addition, the Inclusion Support Programme already helps mainstream services provide inclusive practices and greater access for children with special needs.

How much Child Care Subsidy will my family receive?

To estimate how much the government will contribute towards your family's child care costs, click here.

And keep in mind that the government will withhold 10 per cent of your family's Child Care Subsidy payments to limit/avoid debt if your circumstances change over the year. Your payments will be reconciled at the end of the financial year and anything you're owed will be paid as a lump sum.

What do families need to do between now and 2 July?

To prepare for the New Child Care Package, make sure you:

This child care article was last reviewed or updated on Monday, 15 June 2020

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