Changes To Child Care Payments: Will You Actually Be Better Off?
Changes to Child Care Payments: Will you actually be better off?
From 2 July 2018 changes to child care payments will come into effect. Most of the articles you will find on this topic, talk about the positive effect with will have on families. By helping to create a one payment system instead of the current multi-payment system.
Whilst a simplified process is a step in the right direction not all families will end up better off.
Let’s take a quick look at what the changes are.
Child Care Subsidy
The current Child Care Benefit (CCB) and the Child Care Rebate (CCR) will be replaced with a single payment called the Child Care Subsidy (and the Additional Child Care Subsidy for disadvantaged families). The payment will be made directly to the child care provider to be then passed on to families.
So if you are one of the families who currently claim child care payments as a lump sum, this is will be the last financial year that you can do so.
Three main determining factors are used to work out the level of your new child care payment
- Your combined family income
- Activity test
- Hourly cap based on service type
- Families earning $65,710 or less will receive a subsidy of 85%
- Families earning $65,710 – $170,710 will receive a subsidy rate tapered down from 85% to 50%. Where every $300 increase in income reduces your subsidy by one per cent.
- Families earning $170,710 – $250,000 will receive a subsidy rate of 50%.
- Families earning $250,000 – $340,000 will receive a subsidy rate tapered down from 50% to 20%. Where every $3000 in income reduces your subsidy by one per cent.
- Families earning $340,000 – $350,000 will receive a subsidy rate of 20%.
- Families earning more than $350,000 will receive no subsidy
For families earning $185,710 or less, there will be no annual cap on the yearly subsidy amount. For those earning more than this amount, it will be capped at $10,000 per year.
The impacts felt here are with high-income earners. Right now, families with a high income are entitled to the $7,500 child care rebate as it is not means tested. For women in higher paying roles, who have a partner in a similar position it can make them think twice about returning to work.
This is a time when a lot of women who are highly skilled and would be an asset in the corporate world, choose to go down the work from home path.
The new Child Care Subsidy activity test depends on how many hours both parents work. And the level of subsidy is based off the lowest entitlement parent.
- 8 to 16 hours of activity per fortnight entitles you to receive 36 hours per fortnight of subsidised care
- 16 to 48 hours of activity per fortnight entitles you to receive 72 hours per fortnight of subsidised care
- More than 48 hours of activity per fortnight entitles you to receive 100 hours per fortnight of subsidised care
So families who choose to have one parent stay at home, for whatever reason, will be worse off after the changes. As they will forfeit the child care rebate which previously had no minimum hours requirement. The child care benefit allowed up to 24 hours per week without having to meet any activity test.
The Government believes that having this activity test will make parents change their behaviour to qualify. So the stay at home parent will seek out a minimum of 4 hours work a week.
But others feel that this tighter activity test could see children from lower-income families, where one or both parents don’t work, miss out on early education altogether.
There is extensive research showing the positive effect early education has on children from these backgrounds, so to create an extra barrier for them to attend child care could result in poorer outcomes.
This is perhaps the most glossed over part of the changes. But it is the area that has the potential to have the most impact for families in the inner suburbs and CBD of Brisbane.
The percentages discussed above are all based on an hourly fee cap. You are only eligible to receive a percentage of the following hourly rates:
- $11.55 for centre-based day care
- $10.70 for family day care
- $10.10 outside school hours care.
So if your child goes to a long day care that is open for 11 hours a day, and the daily fee is more than $127.05 ($11.55 x 11) a day, you will be required to fully fund the cost over this amount.
Since the child care rebate was raised from 30% to 50% back in 2008, the price of child care has soared. So it is not uncommon for fees at some centres to be up around $140-150 a day.
Only time will tell what impact the hourly cap has. The intent might be to encourage centres to offer part days rather than full days. However, higher-priced centres might ultimately need to reduce their prices if demand for their service dries up. In this case quality of care can start to become a factor.
Will you be better or worse off?
If you would like to know if you will be better or worse off under the new changes check out the Family Child Care Subsidy Estimator for a side by side comparison.