Starting child care is a huge step for the whole family. Along with the mixed emotions that come with settling little ones into new surroundings, the financial aspect of navigating the Childcare Subsidy has many parents scratching their heads.
To help, we spoke to the experts and have broken down the Australian Government‘s Child Care Subsidy into manageable sections, making it easy for parents to understand.
Here’s what you need to know about the Child Care Subsidy in really simple terms.
What is the Child Care Subsidy?
In 2018, the government replaced two payments, the Child Care Benefit and Child Care Rebate with one single payment, now called the Child Care Subsidy.
The Child Care Subsidy is a means-tested subsidy paid directly to your child care service, reducing the fees parents pay. Parents pay the service provider the difference between the fee charged and the subsidy amount.
Who can get the Child Care Subsidy?
To be eligible to receive the Child Care Subsidy for a child you must meet of the following criteria:
- the child must be aged 13 or under and not attending secondary school (some exemption applies)
- the individual is responsible for paying the child care fees
- parents meet the residency requirements
- the child meets immunisation requirements
- the child is attending an Australian Government approved service – centre-based day care; family day care; outside school hours care; or in-home care.
There are some circumstances where you may be eligible for extra support if you are a grandparent, for a child’s wellbeing, you’re transitioning to work or experiencing temporary financial hardship.
How much Child Care Subsidy do you get?
To determine how much Child Care Subsidy you have access to, the government considers three main factors:
- Family Income: Your family’s total combined annual income
- Activity Test: The total hours of ‘recognised activity’ undertaken each fortnight by both parents.
- Service Type: The type of child care service and whether your child attends primary school.
We go into these three factors in more detail below.
1. Family income
Your combined family income estimate is used to work out the percentage of Child Care Subsidy the government will pay your child care provider, per child.
For example, families with a combined annual income of $68,163 or less will have 85% of their childcare fees subsidised per fortnight. While those with a combined annual income above $352,453 will receive no subsidy.
If your family earns $186,958 or less a year, there is no annual cap on the amount of subsidy you can access.
If your family earns between $186,958 and $352,453 the maximum Child Care Subsidy you can access is capped at $10,373 per child each financial year.
2. Activity test
The number of hours of subsidised child care that families have access to per fortnight is determined by three-steps of activity test.
In two-parent families both parents, unless exempt, must meet the activity test.
In the case where both parents meet different levels of the activity test, the parent with the LOWEST step determines the hours of subsidised care for the child.
Types of approved activity
A broad range of activities meet the activity test requirements, including time taken to travel between the child care centre and the parent’s place of work, training, study, or other recognised activity can also be included.
Recognised activities can be combined to determine the maximum number of hours of subsidy.
For example, if you work 16 hours per fortnight, study for 12 hours and it takes you 4 hours to travel to and from those two activities a fortnight = 32 hours recognised activity per fortnight and 72 hours subsidised care.
Don’t underestimate your activity, it all adds up.
Low-income families with a combined annual income of $66,958 or less who do not meet and are not exempt from the activity test are entitled to 24 hours of subsided care per fortnight under the Child Care Safety Net.
Kindergarten Approved Care
Kindergarten aged children are entitled to 36 hours to attend a Kindergarten program in an approved long-day care service. No activity test is required.
3. Child care service type
The maximum hourly rate the Government will subsidise is based on the type of child care service and how old your children are.
These caps are the maximum amount the Government will provide.
If your child care service charges LESS then the hourly cap, you’ll receive your percentage of the actual rate charged by the centre. If your child care service charges MORE than the capped rate you’ll receive your percentage of the capped rate.
Day rates and sessions
If your child care service charges a daily rate, divide this by the number of hours in the session. Just be aware that the number of hours in a session may not be the number of hours your child actually attends.
For example, Kylie sends Zoe to child care for 6 hours on a Tuesday. The centre has a daily rate of $100 per day based on a 10 hour session. Therefore, the centres’ hourly fee is $10.
One other thing to note about child care centre sessions, even though Zoe is only attending 6 hours of care she’s using 10 hours of subsidy because the day rate is 10-hour session.
Regulations may change so be sure to keep up to date with the latest information.
Information current as of February 2020.
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This article is sponsored by Busy Bees Learning Centres