New Child Care Subsidy — What You Need to Know

On 2nd July 2018, the assistance fee that families receive for childcare will change. We take a look at everything you need to know about the new system and why you need to act now so that you do not stop receiving your subsidy.

While the Government assures us that the changes to childcare payments are positive and will have benefits to many recipients, families are understandably worried about what this transition will mean to them and whether they will be negatively affected. Read on to find out how you will be affected and what action you need to take.

What is Changing

Currently, families eligible for assistance with childcare payments can receive a Child Care Benefit and Child Care Rebate. In an effort to streamline the system, the Government is now replacing these two payments with the single Child Care Subsidy. The subsidy will be paid directly to the childcare services.

One of the main changes will be to the annual cap on childcare. In the past, families who earned a combined income of $186,958 or less had a cap of $7,631 per child per year on the subsidies they could receive. Under the new system, those in that income bracket will now have no cap on the amount of Child Care Subsidy that they are entitled to. In addition, families who earn over $186,958 and under $351,248 used to receive up to $7,613 per child per year, but this cap is now being raised to $10,190 per child per year. (Please note that these amounts are correct at the time of writing but may be subject to change in coming years.)

The other major change is to the income brackets that are used to work out what families are entitled to receive. These have been increased in line with the latest Consumer Price Index (CPI) rates.

How the Subsidy Will Be Calculated

In the new system, the Child Care Subsidy a family will be eligible to will be calculated based on the following:

> Combined Family Income

The percentage of subsidy a family will receive will be based on their combined family income. For example, those earning a combined income of less than $66,958 will be eligible for a subsidy rate of 85%. This falls to 50% for those earning $171,958 to $251,248, and to 20% for those earning $341,248 to $351,248.

> Activity Levels of Parents

An ‘activity test’ will be used to work out the number of hours of subsidised care a family is entitled to. This will be based on the parent or guardian who does the least number of hours of activity (including, but not limited to: paid work, study and training, unpaid work in a family business, looking for work, volunteering, self-employment).

For families who earn up to $66,958 with less than 8 hours of activity, they can receive a maximum of 24 hours of subsidised care per child per fortnight. For those earning up to $351,248, it is up to 36 hours of subsidised care for 8 to 16 hours of activity, 72 hours subsidised for 16 to 48 hours of activity, and 100 hours subsidised for those in more than 48 hours of activity.

> Type of Childcare Service

The hourly rate for the subsidy will be capped at $11,77 per hour for centre-based childcare, $10.90 per hour for family daycare, $10.29 per hour for Outside School Hours Care, and $25,48 per hour for in-home care.

What We Need to Do Before 2nd July

Since families’ details will NOT automatically be transferred to the new system, it is important to make sure you act now so that you do not stop receiving a subsidy. Families must make sure they update their details online before 2nd July, or they may not receive rebates in the future.

To update your details, log in to your myGov account online, or if you do not have an account, create a new one at my.gov.au here. Go to Services and link myGov to Centrelink. Then select Centrelink and go to the option to ‘Complete your Child Care Subsidy Assessment Task’. Then you can follow the steps to give all the information they need. This will include:

an estimate of your combined family income for the 2018 to 2019 financial year;
the hours of recognised activity that you are involved in; and
the type of childcare your family uses.

Who Is Eligible

In order to be eligible for the Child Care Subsidy, there are several requirements:

the child must be 13 years old or under and not attending secondary school (unless they have an exemption)
the service used must be an approved childcare service
those applying must be responsible for paying the childcare fees
the child must meet immunisation requirements
those applying must meet residency requirements

Further Benefits

The Government has established a Child Care Safety Net of $1.2 billion to help disadvantaged and vulnerable children, as well as children in regional and remote communities, to ensure they have access to quality childcare.

This Safety Net also covers an Additional Child Care Subsidy. This will replace the old Special Child Care Benefit and the Jobs, Education and Training Child Care Fee Assistance. The Additional Child Care Subsidy will cover up to 100% of children’s childcare fees for:

families needing practical help to support their children’s safety and wellbeing;
grandparents who are primary caregivers;
families experiencing temporary financial hardship; or
families transitioning from income support to work.

How Much Subsidy You Will Receive

If you are uncertain or worried by changes to the amount of childcare assistance you are entitled to, and how your family will be affected by these changes, you can find out more. To help you work out what you will receive under the new system, the Government has set up a calculator. Simply go to Centrelink and use the Payment and Services Finder tool to estimate what your Child Care Subsidy may be.