Understanding the Child Care Subsidy

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A handy guide to the Child Care Subsidy | Mum's Grapevine

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 Child Care Subsidy has many parents scratching their heads. And the rules and regulations are changing all the time.

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 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 daycare; family daycare; 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.
  • Children in care: The number of children under the age of 5 your family has in approved care.

We go into these four factors in more detail below.

1. Family income

Family Income annual

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 $70,015 or less will have 85% of their child care fees subsidised per fortnight. While those with a combined annual income above $354,305 will receive no subsidy.

Families submit an estimate of their family’s income by the 30th of June for the upcoming financial year. And the estimate is “confirmed” once you lodge your tax return.

Annual Cap

From 10 December 2021, the annual cap on the amount of subsidised child care a family can get has been scrapped completely. Hooray!

Balancing and Withholding

Balancing is when Centrelink double checks you’ve received the correct amount of subsidy for the year by comparing the annual income estimate you provided, your lodged tax return details and your child’s care attendance records.

Centrelink automatically withholds an extra 5% of your allocated subsidy each fortnight. This is called withholding, and it is designed to reduce the likelihood of you receiving an overpayment.

If Balancing shows you’ve been overpaid, you repay the amount of overpayment. If you’ve been underpaid, you are eligible for a refund.

2. Activity test

The number of hours of subsidised child care that families have access to per fortnight is determined by four levels of activity.

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 level determines the hours of subsidised care for the child.

Activity level of childcare subsidy

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.

activity approved

Combining a variety of recognised activities to determine the maximum number of hours of subsidy is allowed. (ie. all your activity doesn’t have to come from the same place).

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 of recognised activity per fortnight and 72 hours of 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 of attendance at a Kindergarten program in an approved long-day care service. No activity test is required.

Kindergarten programs not affiliated with a Long Day Care Service are not usually eligible.

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.

Childcare Subsidy hourly rate

These caps are the maximum amount the Government will provide.

If your child care service charges LESS than 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 sessions

Regulations may change so be sure to keep up to date with the latest information.

4. Number of children in care

Families with more than one child in care may be eligible for a higher subsidy for their second child and younger children if they earn less than $354,305 and have more than one child aged 5 or under in child care.

The ‘standard rate child’ is usually the eldest child in care, while younger children may be eligible for a 30% higher subsidy, up to a maximum 95%.

Second child rate

For example, Lisa is eligible for a 50% child care subsidy. Her eldest child Jack will continue to receive this subsidy for this care. Her younger child, Laura will now be eligible for an 80% subsidy based on the higher rate.

Information is current as of April 2022.

The subsidy you receive will depend upon your own personal circumstances and is subject to your combined family income, hours of recognised activity and child care details. For more information visit The Department of Education’s website.

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