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The new Child Care package – and how it affects you

The Australian Government Child Care Subsidy 2018The Australian Government’s new Child Care Package begins today – July 2, 2018. All families who use child care will be affected — but just what will the changes mean for you and your family?

The Australian Government’s Child Care Package

Key changes

  • There is now just one payment – the Child Care Subsidy. It replaces the Child Care Benefit and Child Care Rebate.
  • The Child Care Subsidy is paid directly to the service provider.
  • The Child Care Subsidy is means tested.
  • Families must meet an ‘activity test’ to be eligible for the Child Care Subsidy.
  • Families earning $66,958* or less a year can access up to 24 hours of care a fortnight without having to meet the ‘activity test’.
  • There is no annual rebate cap for families earning less than $186,958* a year. There’s an annual cap of $10,190 per child for families earning more than this (but less than $351,248).

The Child Care Subsidy – eligibility and level of subsidy

There are some basic criteria for families to meet in order to be eligible for the Child Care Subsidy. These are:

  • the child must be aged 13 or under (and not attending secondary school).
  • the child must meet immunisation requirements.
  • the individual or partner making the claim must meet residency requirements.

Also, the individual making the claim must be responsible for paying child care costs, the care must be delivered by an approved provider in Australia and it must not be part of compulsory education (which means you can’t claim for the cost of a child attending school).

A family’s level of subsidy is determined by three things:

  • combined family income.
  • an activity test.
  • the type of service being accessed.

The Combined Family Income

The Combined Family Income is how the government determines how much of your child care costs it will cover. The lower the family income, the higher the percentage they will cover.

For example, a family earning up to $66,958* a year will have 85 per cent of their fees covered by the Child Care Subsidy. This rate gradually reduces to 0 per cent for families who earn more than $351,248 a year.

The Activity Test

To receive the Child Care Subsidy families must meet an activity test. The number of subsided hours you’re able to access will depend on the number of hours you work each fortnight.

Both parents must meet the activity test – and in circumstances where one parent works less than the other, the subsidy will be based on the parent who works the least.

A parent working between 8-16 hours a fortnight can access 36 hours of subsidised care. A parent working more than 16 – 48 hours can access 72 hours and a parent working more than 48 hours can access 100 hours of subsidised care.

There are a number of ways to meet the activity test including paid work, running a business, unpaid work in a family business, an approved course of study or education, training courses, volunteering, actively looking for work, on Paid Parental Leave or maternity leave.

Families earning $66,958* or less a year can access up to 24 hours of care a fortnight without having to meet the ‘activity test’.

Hours of care do not have to co-incide with actual hours of work — for example, you can work on the weekend and access child care through the week.

The type of service being accessed

While there is no longer an annual cap – there is now a cap on the hourly rate that the government will subsidise. The cap is different depending on the service.

  • For centre-based day care (long day care and occasional care) the cap is $11.77* an hour.
  • For Family Day Care the cap is $10.90* an hour.
  • For Outside School Hours care (before, after and vacation care) the cap is $10.29* an hour.

* the amounts quoted in this article are correct as of July 2018

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This article is intended as a general guide to the Australian Government’s new Child Care Package. To check your eligibility based on your own circumstances visit the Department of Education and Training  website.

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20 comments so far -

  1. I’m still unsure whether I qualify. I have a 3 year old in childcare 3 days per week, 8 hours per day. I am currently on unpaid maternity leave with a 4 month old baby. I was intending to have 12 months of unpaid maternity leave before starting her in childcare and returning to work. Do I meet the activity test to be able to keep my 3 year old in childcare? Or do I need to take on work on the weekends and evenings in order to meet it? On any brochures about the new subsidy it just refers to paid maternity leave, not unpaid maternity leave as a recognised activity. Unless you work for the government, I don’t know anyone who gets paid maternity leave. Also, do you know if the hours of subsidy are based on the hours your child attends (in my case she attends 8 hours, although the centre is open for 12 hours per day). Or is it based on a 12 hour day? Any advice would be most appreciated.

    • hi Lisa! Thanks for reading and thanks for your question.

      I’m no expert on this and I can’t speak for Centrelink but I’ve had a look at their site to see if I can decipher some of this for you.

      I found this:
      Is parental leave considered an activity?

      If you undertake paid work, and paid or unpaid parental leave is a condition of your employment (as an employee or contractor), then this is considered to be part of your paid work.
      The hours of activity will be the same as what they were immediately prior to you commencing parental leave but it needs to be at least eight hours per fortnight. So, if you were working part-time or full time, then you are still considered to be a part-time or full-time employee while you are on parental leave. This is the same as the current system.

      There is no time limit on the amount of time you can be on unpaid parental leave but there is an expectation that you will be returning to work at some point as a condition of your employment.

      So basically yes – unpaid maternity leave counts as an activity.

      Also – your question about Hours. I found this:

      If your service charges a daily fee, the hourly rate will be determined by dividing the daily fee by the hours the service operates. Your service will tell us their standard session fees and how long the session is, and we will use the hourly rate cap to help us calculate how much to pay; just like Child Care Benefit is currently worked out on an hourly rate (around $4.30 per hour).

      So if you centre charges you for the 12 hours then they calculate the hourly rate by dividing the day into 12. You might have to check with the centre on this one to see how they work it all out.

      Hope this helps. All the best x

  2. How will this childcare subsidy affect casual workers who are not entitled to paid leave? I have a 3 yr old in childcare. I was working casually until a few months in to my second pregnancy and stopped due to getting sick. My new baby is 4 months old and centrelink informed me that i still need to meet the activity test but she didn’t seem entirely sure.

    • Hi Ali, Thanks for reading and thanks for your question. I’m afraid that I’m not an expert on this new scheme. And I can’t speak on behalf of Centrelink.

      I do know that you DO have to meet an activity test to receive the subsidy. ALTHOUGH there are exemptions for lower income earners – not sure if this will apply to you but it is worth knowing just in case …

      Low income families on $66,958 or less a year who do not meet the Activity Test will be able to access 24 hours of subsided care per fortnight without having to meet the Activity Test, as part of the Child Care Safety Net.

      If you aren’t eligible perhaps you could look at sending your daughter to a local kindergarten (although she may not be old enough until next year – depending on when her birthday is which state you’re in). They are generally cheaper than day care (but reduced hours, five day fortnight etc), and might suit you if you’re not working. Just an idea!

      Sorry I couldn’t be of more help. All the best x

  3. I think there should be 24/7 for carers who end up in hospital who have no family or friend support. I appreciate foster carers available but dont feel comfortable leaving bmy child with strangers

  4. This new package doesn’t take into consideration how many children you have. I have twins and because the combined family income is on gross and not net we are not eligible. If I give up work we will be under the threshold but then I am making a sacrifice I don’t want to make. If it was on the net income we would be comfortable under as we have high overheads in our business. The old system was better for us. Unfortunately we are one of the families that will be worse off and that is the only assistance we have ever recieved from the Government for our children. Such is life.

  5. how will this affect preschool centres . we pay the term fee and then fill out a form at centrelink to get money back. preschool is only the rebate dont get child care benefit

  6. Hi,

    Given there is a max of 100 hours per fortnight – does this mean that parents who work full time will be out of pocket for 20 hours a fortnight? Basing this on most Centre charging a daily rate, based on 12 hour days.

  7. I have not completely all my Tax returns so if i dont do it before.June.all.my tax returns does that mean i wont.get any childcare

    • HI Anna, Thanks for reading and thanks for your question.

      While we are not government representatives, nor experts on all the ins and outs this new package, our understanding is that the new childcare package requires you to estimate your income for the current year. So from July 2 that means you’ll need to provide an estimate on what you think your earnings will be in the 2018-2019 year.

      This is from their site:
      Because some families are unable to estimate their income accurately, 10 per cent of your weekly Child Care Subsidy entitlement will be withheld. Following reconciliation, if you haven’t received enough Child Care Subsidy based on your adjusted taxable income, you will receive a lump sum payment.

      Hope that helps. All the best x

  8. For families who are no longer entitled to a couple of days a week to use as kindergarten, please be aware these changes do not effect C&K kindy’s and similar (in Queensland). These are funded at source, have no activity test and are perfect if you are wanting something for your child the year before school. The fees are around $35/day as opposed to $80+ so a much more affordable option if you get no rebates (although not suitable for working families as they are only around 6 hours per day, 2-3 days per week).

  9. The hourly rate completely fails to take into account the difference in childcare costs in different location. Try getting LDC for $11.55/hr in an inner-city location – it just isn’t realistic!

    • HI Bigpenguinfan!

      Thanks for reading and commenting. Yes – that is an issue. And there are definitely winners and losers under this new system. SO does this mean you’ll be worse off under the Child Care Subsidy? Did it work better for you when there was an annual cap, rather than an hourly cap? I would like to know more about how families are affected! All the best x

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