How will the government's childcare changes affect your family?

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Packing lunches, changing their clothes, coordinating the pick-up and the drop-off, weighing up the cost of childcare and the rewards of going back to work – it can be tough enough simply being a parent, let alone deciphering childcare funding reform.

The good news is we've done all that for you, so that you and your family can prepare.

What's changing?

From 2 July 2018, Commonwealth support for childcare costs will be delivered via a single, means-tested subsidy.

Target Accounting Service founder Tracy Liang, a member of the Australian Childcare Alliance, says the new system should simplify payments.

“Under the current system, the Child Care Benefit (means-tested) is usually paid directly to the approved childcare service provider. The Child Care Rebate (not means-tested) is either paid to the family’s bank account, or through childcare service providers as a fee reduction,” she says.

“But in future all of the subsidy will be going to the childcare centre and the family is just going to have to pay the gap fee.”

Impact on different families

Low to middle-income families with two working parents will benefit most from the changes, says Liang.

“Average assistance for low-income working families (those earning up to $65,710 combined), who meet the activity test, will rise from 74% to 85% of the fee,” she says.

Wealthy families earning more than $350,000 are set to see the largest decrease. Under the old scheme they received up to $7,500 in annual rebates per child. Soon they'll receive none.

Here's a breakdown of the thresholds:

 

Combined Family Income

Subsidy % of the actual fee charged (below the hourly fee cap)

Up to $65,710

85%

> $65,710 to < $170,710

Tapering to 50%

$170,710 < $250,000

50%

$250,000 < $340,000

Tapering to 20%

$340,000 < $350,000

20%

$350,000 +

0%

 


For families earning more than $180,710, an annual subsidy cap of $10,000 per child will apply.‚Äč

Estimate the impact on your family

To get a picture of exactly what these changes will mean for your family, and to model different scenarios, head to the Australian government's Family Child Care Subsidy Estimator.

It generates a subsidy estimate after considering:

  • family income
  • hours of eligible activities (working, training, studying or volunteering) per fortnight
  • number of children in care
  • care type (centre-based, family day care, or outside school hours care)
  • hours in care
  • associated session or hourly fees

Prepare

Once you know what kind of the subsidy you can expect, work out what your new gap fee might be – will you be paying more or less out-of-pocket?

If you fall within one of the higher income brackets it may be particularly important to start considering the impact on cashflow.

“Your budget will need to be looked at closely and altered to include the gap-fee you'll be paying under the new subsidy,” advises Liang.

In addition to using the estimator tool and speaking to your financial planner, Liang recommends talking to childcare providers.

“They've gone to workshops, and have all of this knowledge to help parents work out how to best structure their work and care arrangements,” she says.

Take a measured approach

With the final details of the childcare reform package not expected until April, Liang says it's a good idea to prepare, but don't necessarily act.

“Don't make a rash decision about your work or childcare arrangements based on incomplete information,” she says.

For example, reducing the hours your children go to care may not be suitable for your family because it may mean you can't work as much.

“Take your time to work out the maximum entitlements you can receive without reducing your working hours,” Liang says.
 

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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Target Accounting Service is an external entity that is not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Target Accounting Service and its employees does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties their products, services and material.