The New Child Care Subsidy – An Overview for Parents

Biggy Bank Child Care Costs

The new Child Care Subsidy (CCS) will replace both the Child Care Benefit (CCB) and Child Care Rebate (CCR) from 2 July 2018.

To date, the Australian Government has been financially assisting families with the costs of child care, through two payments – Child Care Benefit and Child Care Rebate and they’ve often been both a source of support and confusion for many families. The constantly rising costs of child care have prompted the government to reform their current payments into one income and activity tested Child Care Subsidy. Having the one payment package is aimed to make child care more affordable for working families, and more accessible for families in genuine need of support.

 

Child Care Subsidy - two into one
Source: Department of Education and Training

The new Child Care Subsidy will be paid directly to an approved and registered child care service and passed on to parents as a fee reduction, leaving the remaining amount (the gap) payable by the parent. The subsidy will not affect any Family Tax Benefit A or Family Tax Benefit B that are received by families. The CCS will mean that more Australian families are able to receive assistance, with that assistance going primarily to those who are in genuine need of extra financial support.

The level of Child Care Subsidy provided is dependent on three factors:

  1. Combined Family Income
  2. Activity Test
  3. Type of Service

 

Combined Family Income

Lower income families will receive the greatest amount of support, receiving up to a maximum 85% subsidy rate. This percentage will decrease as the combined family income increases, meaning that higher income families receive less financial assistance. The subsidy is available at different percentage levels based on the combined family income. Families earning a combined income of $351,248 or more will not receive any Child Care Subsidy assistance.

The below table outlines the various income levels and what subsidy is available to families (based on 2018/2019 figures):

Combined annual family income Subsidy rate of fees charged
Up to $66,958 85% of fees
$66,958 to $171,958 Stepped reduction to 50% of fees*
$171,958 to $251,248 50% of fees
$251,248 to $341,248 Stepped reduction to 20% of fees*
$341,248 to $351,248 20% of fees
$351,248 or more No subsidy applies

 

Activity Test

The subsidy is also activity tested. The activity test requires that both parents, unless exempt, must pass the requirements of the activity test in order to receive the fee deduction from the subsidy.

Parents must do a minimum of 8 hours per fortnight of paid work or approved training or volunteer work. Families with two parents may find that one parent completes more work on the activity test than the other parent. In this case, the amount of the subsidy received will be calculated based on the parent who completes the lowest activity.

The lowest eligible hours of activity are 8 hours per fortnight (resulting in 36 hours’ worth of subsidy per child per fortnight), and the maximum number of eligible hours are over 48 hours per fortnight (resulting in a maximum of 100 hours subsidy).

The more work/activity a parent completes, the more hours of subsidy they may be entitled to.

The following table outlines the number of hours of subsidised child care families will receive per fortnight based on the level of activity undertaken.

Step Hours of activity Maximum no. of hours of subsidy per child
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

Families earning a combined income of $66,958 or less per year, and who do not meet the activity test requirement, will still be entitled to 24 hours of subsidised care per fortnight.

 

Type of Service

The new Child Care Subsidy will be calculated on an hourly rate basis, with fee deductions dependant on the type of registered service used.

Type of Service Maximum hourly cap rate
Centre Based Day Care (Long Day Care and Occasional Care) $11.77
Family Day Care $10.90
Outside School Hours Care (Before, After and Vacation Care) $10.29
In Home Care $25.48 (per family)

The above cap rates place an upper limit to the amount of child care subsidy the Australian Government will provide. Where the childcare service charges less than the hourly cap rate, then the subsidy amount will be based on the percentage of the actual fee charged as noted in the table above. Where the childcare service charges a fee higher than the applicable cap rate, then the subsidy amount will be based on the applicable percentage of the hourly cap rate.

But why is the child care subsidy being calculated per hour when most approved and registered child care services charge per day?

The calculated hourly rate is a push towards services opening up to the possibility of offering more flexible hours of care – i.e. to hold morning sessions, afternoon sessions and even be more willing to provide occasional bookings. It’s this push that the government is hoping might also make child care more flexible to the needs of working families. With more flexibility, parents may be able to pursue broader work or activity related opportunities.

 

Child Care Safety Net and Additional Child Care Subsidy

The new subsidy also caters to the most vulnerable of families by providing additional support through three key initiatives.

1.  Additional Child Care Subsidy

Provided as a top up payment in addition to the child care subsidy, families experiencing financial hardship, grandparents as primary carers, children whose wellbeing is at risk and parents transitioning to work from income support, may be eligible for the Additional Child Care Subsidy. This additional subsidy could see eligible families being granted greater fee coverage and up to 100 hours per fortnight of child care, and make them exempt from the activity test.

2.  Community Child Care Fund and Connected Beginnings

The Child Care Safety Net also provides additional support for child care services, providing financial assistance in order to better provide for the needs of their community and the children already accessing (or needing to access) child care services and care. Child care services in disadvantaged communities, or in areas of high and unmet demand for care, can apply for access to the Community Child Care Fund.

The Child Care Safety Net also includes a Connected Beginnings program to better provide for eligible Aboriginal and Torres Strait Islander communities. Health and early childhood education services will combine to provide Indigenous Australian’s with support in these areas, and to prepare for a strong and positive start to school.

3.  Inclusion Support Programme

The Inclusion Support Programme has been established to assist mainstream services in improving their capacity and capability to provide inclusive practices for children with additional needs, particularly children with disability.

For further information about the Child Care Safety Net, please visit the Department of Education and Training.

 

Preparing for the new Child Care Subsidy

To prepare for the new Child Care Subsidy, families must update and transition their information via Centrelink before 2 July 2018.

From April 2018, child care services and Centrelink, began sending out notifications to families outlining how to make the transition. No new claim forms will be required to be completed (unless you are new to child care altogether), as the child care subsidy will be calculated using the information your family has provided to Centrelink.

It is therefore imperative that your details together with your income and activity estimates are up to date through myGov and Centrelink before the new package commences. This can be done fairly easily online through myGov, or through Centrelink using the smart phone app, website or visiting your local Centrelink office.

 

With only weeks remaining until the commencement of the new Child Care Subsidy, families must ensure all of their information is accurate, and up to date with Centrelink, in order to receive any subsidised care they may be entitled to. This also ensures that any financial assistance provided is of the correct amount as overpayment or underpayment can result in confusion and even debt for families.

If details have not been updated and the Child Care Subsidy transition has not been finalised (either online through myGov/Centrelink or in person at Centrelink), families risk not receiving any financial assistance at all.

We’ve prepared detailed information on what parents need to do to get ready for the new child care subsidy. Check it out here ‘Getting Ready for the New Child Care Subsidy? Here’s What You Need to Do!

 

Additional Information

Some great additional information about the new Child Care Subsidy can be found:

 

Please share this information with your friends, family or colleagues to make sure they too are ready for the upcoming changes.

 

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