Child Care Subsidy: A simple guide
The Australian Government’s Child Care Subsidy can be difficult to get your head around so we have simplified it for you here. Read our simple guide to the Child Care Subsidy to quickly understand how the subsidy, along with the 2021-22 Federal Budget changes, will impact your family.
How much Child Care Subsidy can I get?
The amount of Child Care Subsidy your family will receive will depend on three things:
- Combined family income
- An activity test
- The type of child care service your child attends
You also need to meet residency requirements and have your child’s immunizations up to date.
We expand on each of these factors below.
1. Combined family income
The percentage of subsidy you are eligible for is based on your family’s annual adjusted taxable income.
If your family earns:
- Less than $69,390, you are eligible to receive 85% of the subsidy
- $69,390 – $174,390, you are eligible to receive between 85 – 50% of the subsidy
- $174,390 – $253,680, you are eligible to receive 50% of the subsidy
- $253,680 – $343,680, you are eligible to receive between 50 – 20% of the subsidy
- $343,680 – $353,680, you are eligible to receive 20% of the subsidy
- More than $353,680, you miss out on any subsidy
Note that there may be a cap to the amount of the subsidy your family may be entitled to. There is no cap on the amount of the subsidy that families earning $189,390 or less can claim. However, families earning between $189,390 and $353,680 will have the subsidy capped at $10,560 per child each financial year.
2. Activity test
The number of hours of subsidised care you received is based on the number of hours of activity you do. For couples, entitlement is based on the partner doing the lower amount of activity.
‘Activity’ is defined as one, or a combination, of the following:
- Paid work
- Study and training
- Unpaid work in a family business
- Looking for work
- Authorised leave (including annual leave, maternity leave, long service leave)
Travel time to and from the activity is counted towards the number of hours spent on that activity.
If your fortnightly activity is:
- Between 8 – 16 hours, you are eligible to a maximum of 36 hours of subsidy per child per fortnight
- Between 16 – 48 hours, you are eligible to a maximum of 72 hours of subsidy per child per fortnight
- More than 48 hours, you are eligible to a maximum of 100 hours of subsidy per child per fortnight
Note these hours of activity do not need to coincide with the child care hours used.
There is an exemption if your family earns less than $69,390 a year and do not meet the activity test where you will be able to access 24 hours of subsided care per child per fortnight, as part of the Child Care Safety Net.
3. The type of child care service your child attends
The maximum hourly rate the Government will subsidise is based on the type of childcare service.
The maximum hourly rate caps are:
- $12.20 per child for a centre based day care (long day care and occasional care)
- $11.30 per child for a family day care
- $10.67 per child for outside of school hours care (i.e. before and after school care and vacation care)
- $33.17 per family for in home care
If your service charges a daily session rate, divide this by the number of hours in the session to get the hourly fee.
How will the Child Care Subsidy affect my family?
The Child Care Subsidy will affect different households with varying impacts. To see exactly how much subsidy your family will receive so you can prepare and budget, visit the Family Child Care Subsidy Estimator.
The Government will in some cases provide extra support through the Additional Child Care Subsidy. You may be eligible for this if you are experiencing temporary financial hardship, transitioning to work or a grandparent with primary care.
How will the 2021-22 Federal Budget changes will affect my Child Care Subsidy?
The Government has announced changes to the Child Care Subsidy as part of the 2021-22 Federal Budget. The changes are designed to encourage the primary carer greater participation in the workforce and will come into effect on 1 July 2022. While these changes may be helpful for families with more than one child in care, they won’t benefit all families.
Currently, the Child Care Subsidy applies at the same rate per child, no matter how many children a family may have in child care. As a result, child care costs double when families have a second child. Additionally, families with combined incomes above $189,390 face a child care subsidy cap of $10,560 per child per year. This means, these families start paying full fees towards the end of the year which reduces their incentive to work.
From 1 July 2022, the following will apply:
- The Child Care Subsidy for families with more than one child aged five and under in child care will increase by 30 percent for the second and subsequent children, up to a maximum of 95 percent of fees paid
- The $10,560 cap on the Child Care Subsidy for families with combined incomes above $189,390 will be removed
How do I receive the Child Care Subsidy?
To ensure you receive the Child Care Subsidy, it’s important that you complete an online Child Care Subsidy assessment using your Centrelink online account through MyGov.
It’s important to inform Centerlink of any changes to your family’s circumstances to avoid an overpayment requiring you to pay back the ATO at tax time.
You need to inform Centerlink if your family’s income or activity levels change, or your relationship status changes.
You may also like
The last thing anyone wants is to be audited when submitting their tax return. Learn the reasons you might be selected for an ATO audit and how to reduce the likelihood of it happening to you.Read more
Australians take pride in doing things themselves. A professional tax accountant could get you a larger refund and save you hundreds of thousands of dollars in the future.Read more