Child Care Rebate changes pass Senate: What it means for Australian families

children in daycare

The government’s highly anticipated childcare reform bill passed through the Senate last night and details about what this means for families are now filtering through.

“More affordable”

“This bill delivers on a core commitment of this government to deliver a more affordable, more flexible and more accessible child-care system,” Education Minister Simon Birmingham told the Senate last night.

The ALP and Greens felt quite the opposite. They’d advocated for more subsidised childcare hours for households with incomes up to $100 000, hoping to hike the current 12 hours to a more generous 15 – without the requirement to prove both parents were working or studying. Their requested amendments were rejected.

Labor Senator Katy Gallagher said the 12 hours subsidised childcare on offer for parents who aren’t both working or studying, fell short for many families in need of support.

“For many of these children, they don’t fit, necessarily, and their life doesn’t fit into convenient 9am to 3pm boxes,” she explained.

A disappointed Greens Senator Sarah Hanson-Young said the new system favoured a very specific type of family.

“Yes if you’ve got a job, if both parents are working, this package is going to be pretty good for you, we all accept that. But for the most vulnerable people in our communities, for those that don’t have both parents working for a variety of reasons, those children will suffer,” she said.

Senator Birmingham said the new system was “simpler, more affordable, more accessible and more flexible” and over 1 million families would benefit from its introduction.

“The more you work the more childcare subsidy will be available to you. The less you earn, the greater the level of that subsidy will be in the future,” Senator Birmingham said.

What we know, so far

The current system will be scrapped

The existing Child Care Rebate – which offers 50 per cent of fees up to annual cap of $7500 – and the means-tested Child Care Benefit will be completely scrapped. A new system – based on income and activity – will replace it. The activity test requires both parents to work, study or volunteer at least eight hours a fortnight.

The $7500 childcare rebate cap has been removed for many families

The removal of the $7500 childcare rebate cap for families earning under $185 710 will be a relief to families who hit this cap well before the financial year is out and find themselves paying exorbitant fees until the cap resets.

The Family Tax Benefit has been frozen for two years

That said, we need to keep in mind that all families will have their Family Tax Benefit frozen for the next two years, to pay for the childcare changes. Which will have a very real financial impact on many families as living expenses increase but their Family Tax Benefit remains the same.

How is the fee subsidy calculated?

The new fee subsidy is based on a set hourly rate for childcare: $11.55 centre-based day care, $10.70 family day care, $10.10 outside school hours care.

Your income bracket determines your fee subsidy

  • Families with a combined income of less than $65 710 a year will be able to claim 85 percent of their childcare fees. For families earning above that figure (but less than $170 710), the per hour subsidy tapers down 1 per cent for each extra $3000 earned.
  • Families with a combined income of over $170 710 will be able to claim up to 50 per cent of their childcare costs, capped at $10 000 annually.
  • Families with a combined income of $250 000 or above will be able to claim dependent on their actual income, with subsidies starting at 50 percent and reducing to 20 percent when they hit $340 000 per annum (again capped at $10 000 annually).
  • Families with a combined income of $350 000 or more will no longer be eligible for subsidised childcare.

Is there help for disadvantaged families?

The package includes extra support and access to childcare for disadvantaged families, families experiencing temporary financial hardship and low-income grandparent carers. $61 million dollars has also been earmarked to provide remote Indigenous families with better access to childcare.

The reforms also include a ‘Child Care Safety Net’ that represents additional investment for services to support children from disadvantaged backgrounds or with additional needs such as disability.

The Child Care Safety Net will also ensure families who do not meet the activity test and are earning $65,710 or less have access to 24 hours of subsidised care per fortnight so they have opportunities to look for employment or more work if they are in a position to do so, and so that their children have access to early learning opportunities.

When does this all happen?

The reforms swing into action in July 1, 2018.

Will you be better off?

The Government says 1 million families will be, but it depends on your individual circumstances, household income and childcare needs.

A spokesman from the Office of the Prime Minister provided the following examples of benefits:

  • A family on $50,000 – both parent/s working, with two children aged under 6 in long day care three days a week at $100 a day will be $3,295 better off a year
  • A family on $80,000 – both parent/s working, with two children aged under 6 in long day care three days a week at $100 a day will be $3,424 better off a year.
  • A family on $94,000 – both parent/s working, with two children aged under 6 in long day care two days a week at $100 a day will be $1,771 better off a year
  • A family on $150,000 – both parent/s working, with two children aged 6 and under in long day care three days a week at $100 a day will be $1,626 better off a year

More reading:

High income parents to lose all childcare rebates
Childcare overhaul passes Senate in late night debate
Government passes $1.6 billion childcare reforms

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