What You Should Know about the New Child Care Subsidy
As a parent with two children who have been in child care, I understand how planning for child care can be overwhelming. As the school year begins, parents all over the country are faced with a multitude of decisions. Which child care center is right for my family? Do I want to choose a centre that is close to my home or nearer to work? What will happen if our income or schedule changes?
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If you are already familiar with child care subsidies in Australia, you may be apprehensive about the changes that will come. The Australian Government is revamping the system. It will replace the existing Child Care Benefit and Child Care Rebate with a new, streamlined Child Care Subsidy.
Understanding the changes will help you make the right decisions for your family and budget. To help you, I have broken down five things that every parent should know about the Child Care Subsidy so that you can plan with confidence.
1. The Rate of Subsidy You Receive Depends on Your Combined Family Income
The combined annual income of your family will have a major impact on how much financial assistance you receive from the Child Care Subsidy. The subsidy is based on a sliding scale. The lower your family’s income, the more child care costs will be covered by the government.
How does it work in practice?
- You will get a higher rate of subsidy if your family’s combined income is below $185,710 per annum. Importantly, the government will lift the cap on the amount you can receive as a subsidy per child.
- Families earning between $185,710 and $355,000 will still have a subsidy cap per child. However, it has now been raised to $10,000 per year per child. This is up from the old cap of $7.613.
The increase in financial assistance will help more families, particularly those with incomes between mid- and high-income brackets.
Subsidies can range between 20 percent for families with higher income and up to 85 percent for families with lower income. This can mean substantial savings on child care for families at the lower income end.
2. The Number of Subsidised Hours You Can Claim is Based on Your ‘Approved Activity’
The new system, unlike the previous subsidy program, which was based on the number of hours you spent in child care, now bases the entitlement to subsidised time on the level of your ‘approved activities’.
The list of approved activities includes a wide range of commitments related to work or study, such as:
- Paid work includes periods of annual leave and long service leave
- Paid parental leave (Maternity and Paternity)
- You can run your own business or be eself-employed
- Work performed by family members that is not paid
- The study of a course or program approved to improve work skills or employment opportunities
- Volunteering
- Looking for work actively
The government supports families that balance child care, work, and study.
If you are a parent who has to juggle multiple roles, such as working part-time while also studying, your subsidy will be based on your total approved activities, giving you access to additional child care hours. This is a welcome change for families with both parents involved in different activities.
3. The More Activity You Undertake, The More Hours of Subsidised Care You Can Claim
The system rewards participation in approved activities by providing more hours of child care subsidised. This is up to 100 hours per week per child. If you are thinking about increasing your working hours, taking a course, or volunteering, this is great news.
Here is a quick guide on how to structure your hours based on the level of activity you have:
- Families who engage in more than 100 hours of approved activities can claim up to 100 hours of subsidised childcare per child per week.
- The number of hours subsidised is proportional to the number of hours between 8 and 100.
- You can still get subsidised child care for up to 24 hours per week per child if your activity is lower than 8 hours and your family income is under $65,710. This is a great safety net for low-income families who have low activity.
It is important to note that your active hours do not have to coincide with the childcare hours. If you use child care on the weekends, but work during the week, then your activity hours will still count toward your subsidy.
This flexible approach is better suited to the real-life family commitments and schedules. It also reflects the many ways that modern parents balance work, study, and childcare.
4. The Hourly Rate Caps for Different Types of Child Care are Different
The new subsidy will introduce hourly rates to help control costs and keep fees reasonable. The family will pay any amount above this as a gap fee.
Each of the three categories has its maximum hourly rate.
- Centre-based care: $11.55 an hour
- Family Daycare: $10.70 an hour
- Before and After School Care: $10.10 an hour
Put this in perspective by using a real-life example.
The Jones Family Story
The Jones family makes $65,000 per year and has a child in a center-based care program. According to their income, the Jones family qualifies for a subsidy of 85%.
- The subsidy covers 85% of the $9.00 (which is $7.65 an hour) if the child care center charges less than the cap of $11.55 for centre-based childcare. The Jones family is responsible for the $1.35 gap fee per hour.
- The subsidy is only 85%, so if the centre charges $11.55 per hour, but the rate charged by the centre is $12.00, the subsidy would only cover $9.82. The family must pay the difference of $12.00 per hour and $9.82. This is a gap fee.
The rate cap encourages child-care providers to keep their fees within reasonable limits. However, families should still check the fees when selecting a service to avoid any unexpected expenses.
5. The Online Estimator Can Help You Plan Your New Subsidy
It’s important to start planning, even though the official changes will begin on July 2nd next year. The government provides an online child care subsidy estimator that allows you to estimate the amount of subsidy your family may receive under this new system.
The estimator is:
- You can play around without worrying about your privacy.
- You can enter various scenarios such as changing the child care arrangement, increasing your work hours, or starting part-time studies.
- You can make informed decisions long before the new system is implemented.
This tool will give you peace of mind and make it easier to budget for the coming year.
The New System: Transitioning to it
Your child care provider and the government will work together to ensure a smooth transition for your child if they are already receiving care under the existing system. The government has promised to provide clear guidance and information before July so that you will know what to expect.
You may need to take action.n
Be on the lookout for any notifications you receive from your child-care provider or the government. Before the new system begins, you may need to confirm or update your income details and activity details.
Plan Your Family Vacation with These Tips
- Calculate your future child care costs by comparing your current fees and usage to the new subsidy cap.
- Review your approved activities. Update your details if you are planning to increase your work hours or study.
- Think about the location and type of care. Different care types (family day care, centre-based care, before/after-school care) come with different subsidy caps. Weigh your options carefully.
- Plan for possible gap fees. Out-of-pocket costs may remain even with the subsidy.
Conclusion
Child care is an important part of the lives of many families. It helps parents return to their jobs, studies, or training, while also providing enriching experiences for young children. The new Child Care Subsidy is designed to simplify the system and make it more equitable. It also aims to better support working families, those in training, or studying.
Understanding these changes will help you make the best decision for the care of your family and maximize the financial assistance you are entitled to.
