What you need to know about the child care changes that start tomorrow

After years of reports, inquiries, promises and delays, the massive shake-up of the childcare system finally starts on Monday.

There's been a lot of political argument about whether families will be better or worse off.

The Education Department estimates close to 1 million families will be better off while about 280,000 will be worse off.

So who's better off under the changes?

Low-income and middle-income families where both parents work or with a single working parent will be better off.

This is because of two key changes. The subsidy rate and the annual cap.

Under the changes, the lowest-income families will be paid the most: 85 per cent of their childcare costs.

From there the subsidy gradually tapers down as earnings increase. The lowest subsidy available is 20 per cent for the highest-earning families, before it cuts out at $351,258.

Here's how much subsidy you will get depending on your family income:

Family income Subsidy you'll get
Up to $66,958 85 per cent
$66,958–$171,958 85–50 per cent
$171,958–$251,248 50 per cent
$251,248–$341,248 50–20 per cent
$341,248–$351,248 20 per cent
More than $351,248 No subsidy

The annual cap or limit on Government support will be abolished for most families.

Under the existing system, families using child care five days a week hit the annual cap only halfway through the year, meaning their child care fees doubled overnight for the remainder of the financial year.

This caused financial strain for hundreds of thousands of families. And as child care costs increased, each year the cap of $7,500 ran out earlier and earlier.

This cap will be removed entirely for families earning less than $186,000 a year and lifted from around $7,600 to $10,000 for families earning between $186,000 and $351,000.

Who gets the short end of the stick?

Families that don't meet the activity test required to qualify for the new subsidy — those where one or both parents don't work.

Families with one parent who works part time will qualify for fewer hours of subsidised care than before, because these hours will be based on the parent or guardian with the lowest number of working hours.

Casual workers are allowed to estimate their hours over three months, but there's some concern the new system will be more difficult for workers with variable hours.

To meet the activity test parents must be either: working (including maternity leave), looking for work, volunteering, doing unpaid work in a family business, studying, training or self-employed.

Hours of "activity" Hours of subsidised care
8–16 per fortnight 36 per fortnight
16–48 per fortnight 72 per fortnight
48+ per fortnight 100 per fortnight

Why have this test?

The Government argues the new policy will encourage workforce participation and help families where child care is a necessity to allow them to work.

But Labor says early education should be broadly available to all children because of the benefits it brings, and argues the activity test hurts vulnerable families.

There is a safety net for families earning less than $66,000 who fail the activity test.

Those families will still able to access 12 hours of subsidised care per week. It's worth noting this is half of what they were entitled to under the old system.

What if childcare centres put up their fees?

That's the other problem with the change.

The new system sets hourly caps on how much the Government will pay, so if a centre charges more per hour than what the Government thinks is reasonable, parents will have to pay the extra cost.

For example, for long day care the Government limit is $11.77 an hour. If a centre charges more than that parents will have to pay the difference.

It will be calculated by the hour using these hourly rate caps:

  • Centre-based day care: $11.77 per hour
  • Family day care: $10.90 per hour
  • Outside school hours care: $10.29 per hour
  • In home care (with nannies, au pairs): $25.48 per hour (per family)

Will the transition happen automatically?

No. Families are required to update their details through the Australian Government's MyGov website or

As the new subsidy is means-tested, families need to provide an estimate of income and details of hours of work.

Original Article

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