Understanding the Australian Child Care Subsidy: A Complete Guide

Posted on Jun 25, 2024 in Training and Employment Advise

Understanding the Australian Child Care Subsidy

The Child Care Subsidy (CCS) is a financial assistance program provided by the Australian Government to help families with the cost of child care. It aims to make early childhood education and care more affordable and accessible for families. Here’s a comprehensive overview of how the Child Care Subsidy works:

Eligibility

To be eligible for the Child Care Subsidy, you must meet several criteria:

1. Residency Requirements:

  • The child receiving care must meet immunisation requirements.
  • The individual applying must be an Australian citizen, a permanent resident, or hold a visa that allows them to access government payments.

2. Child Care Provider:

  • The child must attend an approved child care service. Approved services include long day care, family day care, outside school hours care, and in-home care.

3. Activity Test:

  • The amount of subsidised care you can receive is determined by an activity test. This test considers the number of hours you and your partner (if applicable) spend in recognised activities such as work, study, training, or volunteering.

How the Subsidy is Calculated

The amount of Child Care Subsidy you receive depends on three main factors:

1. Combined Family Income:

  • The percentage of subsidy you are eligible for is based on your combined family income. The subsidy rate decreases as income increases.

2. Activity Level:

  • The number of hours of subsidised care you can access is based on the activity level of both parents. More hours of recognised activity result in more hours of subsidised care.

3. Hourly Rate Cap:

  • The subsidy is also subject to an hourly rate cap based on the type of child care service. If the child care provider charges above this cap, you will need to pay the difference.

Steps to Apply

  1. Create a myGov Account: If you don’t already have one, create a myGov account and link it to Centrelink.
  2. Submit a Claim: Log in to your myGov account, go to Centrelink, and submit a claim for the Child Care Subsidy.
  3. Provide Information: You will need to provide information about your family’s income, activity levels, and child care arrangements.
  4. Receive Notification: Once your claim is processed, you will receive a notification about your eligibility and the amount of subsidy you will receive.

Payment Process

  • Direct to Provider: The Child Care Subsidy is paid directly to your approved child care provider. This reduces the fees you need to pay out of pocket.
  • Gap Fee: You will be responsible for paying the difference between the provider’s fee and the subsidy amount, known as the gap fee.

Additional Subsidies

  • Additional Child Care Subsidy (ACCS): This provides extra support for families facing special circumstances, such as financial hardship, transitioning to work, or experiencing domestic violence.

Annual Cap

  • No Annual Cap: As of July 2022, the annual cap on the Child Care Subsidy has been removed, meaning there is no limit to the amount of subsidy a family can receive in a financial year.

Example Calculation

Let’s say a family has a combined income of $90,000 and both parents work 40 hours a week. They use long day care, which charges $10 per hour.

  1. Subsidy Percentage: Based on their income, they might be eligible for a 65% subsidy.
  2. Activity Level: Both parents working 40 hours a week means they meet the activity test for the maximum number of subsidised hours.
  3. Hourly Rate Cap: The hourly rate cap for long day care might be $11.77 (this is a hypothetical figure for illustration).

Calculation:

  • Subsidy amount per hour = $10 (provider fee) x 65% (subsidy rate) = $6.50
  • Gap fee per hour = $10 (provider fee) – $6.50 (subsidy) = $3.50

If the child attends care for 40 hours a week, the family would pay:

  • Weekly gap fee = $3.50 x 40 = $140

Assumptions:

  • Daily Cost: $175
  • Weekly Cost: $175 x 5 days = $875
  • Hours per Day: 11 hours
  • Total Weekly Hours: 11 hours x 5 days = 55 hours
  • Subsidy Percentage: Let’s assume the family is eligible for a 65% subsidy.
  • Hourly Rate Cap: $15.90

Steps to Calculate the Subsidy:

  1. Calculate the Hourly Cost:
    • Daily cost: $175
    • Hours per day: 11
    • Hourly cost: $175 / 11 = $15.91
  2. Determine the Subsidy Amount:
    • Subsidy percentage: 65%
    • Subsidy amount per hour: $15.90 (hourly rate cap) x 65% = $10.34
  3. Calculate the Subsidy for the Week:
    • Subsidy per hour: $10.34
    • Total weekly hours: 55 hours
    • Total weekly subsidy: $10.34 x 55 = $568.70
  4. Calculate the Gap Fee:
    • Total weekly cost: $875
    • Total weekly subsidy: $568.70
    • Weekly gap fee: $875 – $568.70 = $306.30

Summary:

  • Total Weekly Cost: $875
  • Total Weekly Subsidy: $568.70
  • Weekly Gap Fee: $306.30

Conclusion:

In this scenario, with a childcare provider costing $175 per day and assuming a 65% subsidy rate with an hourly rate cap of $15.90, the family would need to pay a gap fee of $306.30 per week after the subsidy is applied.