If you’re one of the millions of Australians who rely on childcare, it’s important to understand what the federal government’s New Child Care Package offers when it becomes effective on July 2 this year.
There are several key areas of the package which have been significantly overhauled by the government in a bid to provide greater relief to low- and middle-income families, who are deemed to have the greatest financial need.
The New Child Care Package is also likely to offer a fresh financial incentive to those families who may have a parent or carer considering weighing up whether to return to work, by providing a range of options that were not previously available to them.
And if your family is currently using childcare services, you would be encouraged to review your existing arrangement to see if it remains the most financially effective solution for your circumstances after the new package comes into effect.
Essentially, the New Child Care Package eliminates the current multi-payment system and replaces it with one central means-tested and employment-related structure. Key features include:
One new subsidy to replace the current childcare rebate and benefit structure
The new subsidy assessment test for families will be calculated based on three main elements related to each family’s individual circumstances. These are:
- The combined family income
- The work level of each parent
- The type of childcare service being used
In terms of employment, both parents will have to work to satisfy the eligibility criteria and will need to be employed, study or volunteer for at least eight hours per fortnight.
If your work level does not meet the minimum hours, you can expect to receive 12 hours of child care if you earn less than $65,710. However, if your family income exceeds that figure and you don’t meet the work level criteria, you will not receive any subsidy.
Based on the calculation method for the new package, once you qualify for the level of work activity, the estimated subsidy amounts equate roughly to the following income figures:
- Families earning $65,710 or less will have 85 per cent of childcare fees covered
- The maximum subsidy amount decreases gradually down to 50 per cent once you’re earning $170,710 and remain around that level for those earning up to $250,000.
- If you’re earning between $250,000 and $340,000, the subsidy reduces to around 20 per cent
- If you are earning over $350,000, you will not be eligible for any subsidy
Claim amounts are based on a set maximum hourly rate for different forms of childcare services
Under the New Child Care Package, the maximum subsidy you can claim for the childcare service you choose is based on the following hourly rates:
- $11.55 for centre-based day care
- $10.70 for family day care
- $10.10 for outside school hours care
If you pay more than this through your childcare provider, you will have to financially cover the difference.
Changes to the annual cap
There will be no annual cap on subsidies for families with an income up to $185,710, but if your family is earning more than that, you will only be able to claim $10,000 per child.
Bonus subsidy for families with special identified needs
Under a newly introduced childcare safety net, there will be a bonus subsidy for those families who are determined to be disadvantaged, who may have children who are vulnerable or at risk of abuse and neglect; those experiencing temporary financial hardship; those from regional and remote communities; and for grandparent carers on welfare.
This allows those children to have access to education and childcare that may not ordinarily be available to them, and may potentially equate to childcare which is completely subsidised for full-time attendance of 50 hours per week.
Rules on method of payment and child eligibility
The new subsidy, officially called the Child Care Subsidy, will be paid directly to service providers so that it can be passed onto families as a fee reduction.
You can then make a co-contribution to your childcare fees and pay your provider the difference between their fee and the subsidy amount.
In terms of a child’s eligibility, there are some basic requirements which include:
- The age of the child (must be 13 or under and not attending secondary school)
- The child meeting immunisation requirements
The working members of the family must also meet the residency requirements.
For all families investigating whether they will qualify for childcare assistance under the new guidelines, and at what level, the government has a dedicated family Child Care Subsidy estimator. This will allow you to estimate your subsidy entitlement before existing arrangements change on July 2.