Subsidy Substitute

April 20th, 2018
Subsidy Substitute

Not only are many of our clients growing small businesses, but they’re also growing small families.

If you currently receive the Child Care Benefit or the Child Care Rebate, then you’ve probably already been contacted about the changes and reminded to submit the online form via Centrelink or myGov before the July 2 deadline to ensure that there’s no disruption to your payments.

Unfortunately, in recent years, the term “childcare affordability” has tended to be oxymoronic.

We’re passionate about working with our clients to produce financial planning and management solutions that place them in the most advantageous position to achieve professional success.

The cost of childcare has become more than a number to factor into their budget spreadsheet, but a true financial impediment to achieving their business goals.

Thankfully, it looks like relief is just around the corner.

Out with the old, in with the new

The Federal Government has unveiled significant changes to the nation’s childcare benefit system, changes that will take effect on July 2nd, 2018.

The current system features two subsidies, the Child Care Benefit and Child Care Rebate, but will be put aside in favour of a single means-and-activity-tested subsidy called the ‘Child Care Subsidy’.

The Child Care Subsidy will be paid directly to service providers before being passed on the families as a fee reduction. The new system is likely to affect both the eligibility and rate of payment for the families currently receiving a benefit.

You’re still getting put to the test

Your family’s eligibility will depend on a few things. Firstly, the age of your child – they must be 13years or under and NOT attending secondary school. As under the previous system, your kids must meet the immunisation requirements, while you or your partner also meet residency requirements.

Qualified for eligibility? Great, the rate of your subsidy will depend on the next 3 things:

Activity Test

If you are in a two-parent family, your family will only be eligible for a subsidy if both parents work, study or volunteer for a minimum of 8 hours per fortnight. Families with recognised activities for:

  • 8-16 hours per fortnight are eligible to receive 36 hours per fortnight of subsidised care
  • 16-48 hours per fortnight are eligible to receive 72 hours per fortnight of subsidised care
  • More than 48 hours per fortnight are eligible to receive 100 hours per fortnight of subsidised care

Combined Family Income

The percentage of childcare fees your family is eligible to be subsidised for will be determined by a grading system that examines your family’s combined annual income:

  • Families on $65,710 or less will receive a payment equivalent to 85%of their fees
  • Families on $65,710 – $170,710 will receive a payment that is tapered down from 85% to 50%, receiving 1% less for every $3000
  • Families on $170, 710 – $250,000 will receive a payment equivalent to 50% of their fees
  • Families on $250,000 – $340,000 will receive a payment that is tapered down from 50% to 20%, receiving 1% less for every $3000
  • Families on $340,000 – $350,000 will receive a payment equivalent to 20% of their fees
  • Families earning more than $350,000 will receive no subsidy

The combined family income will also determine whether your subsidy will hit a yearly cap. If your family earns below $186,958, then there will be no limit of their accessible subsidy. For higher earning families, the annual cap will increase under the new system to $10,190 per child.

Service Type

As a footnote to the grading of the family income, the percentages we’ve just listed are subject to an hourly fee cap, depending on the type of childcare service you are employing. The caps:

  • Centre Based Day Care – $11.77/hour
  • Family Day Care – $10.90/hour
  • Outside School Hours Care – $10.29/hour
  • In Home Care – $25.48/hour/family

So overall, who does the Subsidy subsidise? 

Well, most families. In fact, government estimates have indicated that the changes will increase the amount of assistance for 816,000. Inevitably with the introduction of a grading system, not all families will be better off. Despite this, it is predicted that only 128,000 families will receive less assistance than they do under the current system.

The new system is particularly designed to better target low-to-middle income families and give them more of a leg-up. The Additional Child Care Subsidy and the Child Care Safety Net will provide extra help to families experiencing particular hardships.

Make sure you benefit

What to do now?  If you currently receive the Child Care Benefit or the Child Care Rebate, make sure you submit the online form via Centrelink or myGov before the July 2 deadline to ensure that there’s no disruption to your payments.

We know, one minute we’re advising you to make sure 2018 starts off on the right foot, the next we’re looking at MID-YEAR financial changes. Time’s flying, change is coming. This time it’s welcome. Before you know it those children you’re finding childcare for will be looking after themselves.

If you would like any further information on the Child Care Subsidy, don’t hesitate to get in touch.