Posted 28/06/2023 by Michael Klapdor
July 2023 will see the commencement of significant changes to Child Care Subsidy (CCS) including payment rate increases and expanded eligibility.
The CCS is an Australian Government payment which assists families with the costs of child care. The payment is complex, with rates based on the type of child care used, the number of children in care, whether fees exceed rate caps, an income test, and an activity test. This FlagPost explains the key changes and how they will affect families using child care.
Changes to CCS rates and the income test
CCS rates are calculated as a percentage of the fee charged by the child care provider or a percentage of the hourly rate cap set by government, whichever results in a lower rate. An income test determines what percentage is applied. Families with more than one child aged under 6-years-old attending child care can receive a higher percentage for the additional child or children. Different hourly rate caps apply for school-age children and to different provider categories – for example, centre-based care or family day care.
Under changes made by the Family Assistance Legislation Amendment (Cheaper Child Care) Act 2022, the rates determined under the income test will increase from 10 July 2023. The maximum base rate (the rate for a family’s first eligible child) will increase from 85 to 90% of the fee charged or the hourly fee cap (whichever is the lesser). The new income test will see the rate gradually reduce by one percentage point for every $5,000 of family income above $80,000. The CCS rate will reach 0% for families with an annual income of $530,000, an increase from the current maximum family income of $356,756. The higher rate for second or subsequent children in child care will remain. The higher rate for second and subsequent children will not apply for families with income over $356,756—the rate will be the same as that for the first child in care.
Figure 1 and Tables 1 and 2 set out the current and post-July 2023 income tests.
Figure 1 Child Care Subsidy base and higher rate income test, current and from July 2023
Notes: CCS rate is calculated as a % of fee charged or hourly rate cap, whichever is lower.
Source: Parliamentary Library estimates, based on ‘Child Care Subsidy: Family eligibility and entitlement’, Department of Education, 14 June 2023.
Table 1 Child Care Subsidy base rate income test, current and
from July 2023
|
2022–23 base rate
|
2023–24 base rate
|
|
Family
income
|
Applicable
%
|
Family
income
|
Applicable
%
|
|
Up to $72,466
|
85%
|
$0 to $80,000
|
90%
|
|
More than
$72,466 to below $177,466
|
Decreasing to
50%
Subsidy
decreases by 1 percentage point for each $3,000 of family income
|
More than
$80,000 to below $530,000.
|
Decreasing
from 90%
The applicable % decreases by 1 percentage point for every $5,000 of family
income
|
|
$177,466 to
below $256,756
|
50%
|
|
$256,756 to
below $346,756
|
Decreasing to
20%
Subsidy decreases by 1 percentage point for each $3,000 of family income
|
|
$346,756 to
below $356,756 
|
20%
|
|
$356,756 or
more
|
0%
|
$530,000 or
more
|
0%
|
Source: Adapted
from ‘Child Care Subsidy: Family
eligibility and entitlement’, Department of Education, 14 June 2023.
Table 2 Child Care Subsidy higher rate for 2+ children aged <6
income test, current and from July 2023
|
2022–23 higher rate
|
2023–24 higher rate
|
|
Family income
|
Applicable % for 2+ children aged <6
|
Family income
|
Applicable % for 2+ children aged <6
|
|
$0 to $132,466
|
95%
|
$0 to $138,118
|
95%
|
|
More than $132,466 to below $177,466
|
Between 95% and 80%
The applicable % decreases by 1 percentage point for every $3,000 of family
income
|
More than $138,118 to below $183,118
|
Decreasing from 95%
The applicable % decreases by 1 percentage point for every $3,000 of family
income
|
|
$177,466 to
below $256,756
|
80%
|
$183,118 to
below $262,408
|
80%
|
|
$256,756 to
below $346,756
|
Between 80%
and 50%
The applicable % decreases by 1 percentage point for every $3,000 of family income
|
$262,408 to
below $352,408
|
Decreasing
from 80%
The applicable % decreases by 1 percentage point for every $3,000 of family
income
|
|
$346,756 to
below $356,756
|
50%
|
$352,408 to
below $362,408
|
50%
|
|
$356,756 or
more
|
0%
|
$362,408 or
more
|
Higher CCS rates
no longer apply, all children in the family will receive the base rate
|
Source: Adapted
from ‘Child Care Subsidy: Family
eligibility and entitlement’, Department of Education, 14 June 2023.
Who will benefit
According to the Minister for Education Jason Clare, around 1.26 million families – 96% of those using child care – will be financially better off as a result of the CCS changes and none will be worse off. Department of Education briefing documents released after a Freedom of Information request (FOI reference D23/663876) showed that around 63.3% of families who will be better off had combined incomes below $150,000 per annum. The department estimated that around 24,900 families with incomes over $350,000 per annum would be better-off under the changes (p. 27).
Figure 2 shows families using child care, and those expected to be better off under changes by broad income bands.
Some families may not be better off as they are already receiving higher levels of assistance through the Additional Child Care Subsidy (ACCS). The ACCS provides additional assistance for children at risk of abuse or neglect, families experiencing financial hardship, those transitioning from income support to work, grandparent carers on income support, and some low‑income families. ACCS rates will not change in July 2023.
Figure 2 Families using child care and families better off from July 2023 by annual family income
Source: Parliamentary Library estimates based on data in Department of Education, ‘Senate Estimates Briefs’, (Freedom of Information disclosure log reference D23/663876), 27.
The cameos set out in Table 3 show how families on different incomes will benefit under the changes.
Table 3 CCS rates and out-of-pocket costs for example families, 2 children at centre-based care for 4 days a week ($120 daily fee per child)
|
Family income
|
Current (weekly)
|
From July 2023 (weekly)
|
|
CCS rate
|
Out-of-pocket costs
|
CCS rate
|
Out-of-pocket costs
|
Costs difference
|
|
$100,000
|
$820
|
$140
|
$869
|
$91
|
-$49
|
|
$150,000
|
$712
|
$248
|
$802
|
$158
|
-$90
|
|
$200,000
|
$624
|
$336
|
$701
|
$259
|
-$77
|
|
$300,000
|
$486
|
$474
|
$545
|
$415
|
-$59
|
|
$400,000
|
$0
|
$960
|
$250
|
$710
|
-$250
|
Notes: Hourly fee of $12 per hour for 10 hours per day. Combined weekly fee is $960.
Sources: Parliamentary Library estimates and ‘Child Care Subsidy calculator’, Australian Children's Education and Care Quality Authority.