Understanding the new Child Care Subsidy
By Katrina Nair
1 July 2018
On July 2 the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2016 will be implemented across Australia, changing the way that families receive assistance in paying for child care.
Currently the Government provides two forms of assistance to families receiving child care, they are:
The Child Care Benefit
The Child Care Rebate
The Child Care Benefit depends on the age of your children, the family’s current year income, the number of children in care, and the hours of care used. The Child Care Benefit is means tested.
The Child Care Rebate is not means tested. It covers 50% of families out of pocket costs up to $7,500 per child.
From July 2 the Child Care Benefit and the Child Care Rebate will be combined into a single payment called the Child Care Subsidy. Three things will determine what level of Child Care Subsidy available to a family:
A family’s income
An activity test
The type of child care service used
Families with a combined family income of up to $65,710 will receive a subsidy of 85% of what they pay. The subsidy rate tapers down as familial income increases from there. There will be a cap of $10,000 on total Child Care Subsidy payments available to families with an income greater than $185,710.
To calculate the Child Care Subsidy entitlement for each child, families will need to provide a family income estimate to Centrelink when making a claim for the Subsidy. At the end of the financial year, Centrelink will balance the family’s payments by comparing the estimated income to the actual income (generally after their tax return has been lodged). Families are able to update their family income estimate at any time during the year and their Subsidy will percentage will be adjusted accordingly.
Families where parents work irregular hours will be asked to estimate the highest number of hours they expect to work in a fortnight over the following 3 month period.
The Activity Test
The new scheme requires families to pass an Activity Test, in a two parent family both parents are required to meet the activity test, where the activities of the person with the lowest number of hours are used to determine the relevant ‘step’ of the Activity Test. The more of an approved activity that families complete, the higher the amount of subsidised childcare they can access – up to 100 hours per fortnight, per child.
Approved activities under the new scheme include: paid work (including leave), study and training, unpaid work in a family business, looking for work, volunteering, self-employment and other activities on a case by case basis. Families are asked to self-declare their activity to the Department of Human Services. Although no evidence is required to accompany the self-declaration, the Department of Human Services may undertake random spot checks in which families may be required to provide evidence of an approved activity. Families are advised to update their activity test details whenever they change in order to avoid getting a debt. Grandparents who are the primary carers for their grandchildren are exempt from the activity test.
Families with a combined annual income of less than $65,710 who do not meet the activity test will be able to access up to 24 hours of subsidised care per child per fortnight, as part of the Child Care Safety Net. However, families who earn over $65,710 will no longer receive subsidised care unless they meet other requirements.
Hours of activity*
Maximum number of hours of subsidy per child*
8 hours to 16 hours
More than 16 hours to 48 hours
More than 48 hours