What are the proposed childcare changes

3 December 2015

The government has announced changes to Australia’s childcare payment system, designed to make the process and payments simpler and fairer. When the reforms are implemented in  2017, the government expects families earning between $65,000 and $170,000 per annum to be $30 per week better off.

The federal government has announced childcare subsidy reforms that, subject to the passage of legislation, will be implemented in 2017 and which will:

  • Provide an additional $30 per week of benefit to families earning between $65,000 and $170,000 per annum.
  • Be strongly linked to an activity test, to ensure that parents that are working longer hours receive more hours of subsidised care.
  • Involve an additional $3.2 billion of government /taxpayer spending.
  • Introduce a cap in terms of subsidised cost per hour of care.
  • Maintain the tapering of the subsidy at 50 percent up to $250,000, down to a floor of 20 percent at a family income of approximately $320,000.
  • Exempt households earning under $65,000 from the activity test (which includes work, volunteering and studying) for the first 12 hours of subsidised childcare

Childcare subsidies linked to activity test

In announcing the reforms, the Minister for Education, Senator Simon Birmingham, emphasised the importance of linking childcare subsidies to an activity test.

“We want indeed the encouragement to be there to volunteer, to study, to look for work and to work. And that is absolutely why the model has been developed in the way it has, with the activity test that’s there but also, to reward people who are working more and therefore who rely on child care more with more hours of subsidy for their child care,” he said.

“It’s the core part of the fairness proposition. The more you work, the more hours you get? the less you earn, the greater the subsidy you get.”

Controlling the cost of childcare

As mentioned, the government intends to introduce a cap on the dollar value of subsidy per hour of care, to help control the rising costs of that care.

“The hourly cap that we’re setting… is a very fair cap for child care providers,” said Senator Birmingham.

“It ensures the vast majority of child care providers’ current fees come in at or under that hourly cap that will kick in in 2017 under the proposals. But we are applying it to try to stop the huge rate of growth we’ve seen in cost in child care in recent years. And by setting a benchmark for the change in that hourly cap in the future, that tries to keep a limit on it by ensuring that child care providers feel an obligation to keep their fees at a minimum and that families do have an incentive to shop around and put the pressure to keep prices down.”

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