News and Views

Child care cost relief on the way

The Federal Government’s early childhood education and care reforms have passed the Senate and will deliver more affordable, accessible and flexible services for families.

The Jobs for Families legislation will encourage people into the workforce and tackle rising child care fees and expenses while also supporting early learning opportunities for children.

The reforms and additional investment will benefit around one million families.

Support will go to people working the most and earning the least.

It is estimated the reforms will encourage more than 230,000 families to return to the workforce or increase their paid employment.

There are three key features of the reforms:

  • Better support for people working the most and earning the least. The changes simplify the current complicated rebate system by replacing payments with a single, means-tested Child Care Subsidy that pays a much higher rate of 85 per cent for hardworking families earning up to $65,710 and then tapers down to 20 per cent for families earning more than $250,000 and cuts out for families earning more than $350,000. The reforms also introduce a three-step activity test with an entry point of four hours a week that means families are eligible for 18 hours a week of subsidised child care. This will align hours of care with the combined amount of work, training, study, volunteering or other recognised activity being undertaken by parents.
  • Relief from the rebate cap. The Federal Government will abolish the $7,500 rebate cap to ensure families on incomes of $185,710 or less aren’t limited by a cap on the amount of child care they can access and the cap will be increased to $10,000 for families earning more than $185,710. This will offer relief to around 100,000 families that hit the current $7,500 rebate cap.
  • Downward pressure on incessant fee increases. The reforms introduce an ‘hourly rate cap’ on the subsidies the Government will pay that will set a benchmark price so providers will be held accountable. The Federal Government will also slash red tape so services can be more flexible in the hours they deliver instead of the current system where families who routinely need and use only four, six or eight hours of care, are charged for 10 or 12 hours.

The reforms were also designed with regional and rural early childhood education and care services and their families in mind.

Families will be able to access hundreds of millions of dollars in additional support and a Commonwealth funding guarantee for approximately 300 ‘Budget Based Funded’ services that for the most part operate in those areas and in Indigenous communities.

In addition, The Community Child Care Fund will deliver services for children from disadvantaged backgrounds or with additional needs, including a disability.

The Child Care Safety Net will also ensure families who do not meet the activity test and are earning $65,710 or less have access to 24 hours of subsidised care per fortnight.

Other elements of the reforms will deliver stronger compliance powers that build on the $1 billion the Government has stopped going out the door to people attempting to rort the child care system.

These detailed reforms are the result of consultation with experts, input from the Productivity Commission and three Senate inquiries and they are the most significant improvements to the system in 40 years.

The Prime Minister thanked the Senate for working constructively with the Government to pass these crucial reforms and fix a broken system that has been hurting families and taxpayers.

The Federal Government has delivered the largest reform of Australia’s child care system in a major win for Australian families.

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