Chapter 4

Income support system around work and care

The committee has received evidence about how the structure of the income support system and associated payments are negatively impacting the ability of people balancing work and care to maintain a living wage, take proper leave when they need it, and to sustain employment in the long term.
The committee heard on numerous occasions that restrictive or shortterm eligibility requirements, and activity and income tests, are entrenching disadvantage instead of acting as a support and safety net for people with informal caring roles. These factors in turn, limit the facilitation of carers transitioning back into and remaining in the workforce.
This chapter summarises the financial supports available to carers, and other income supports that relate to people with work and care responsibilities. It further summarises some of the key issues with these systems as put forward in evidence thus far, and how these issues limit workforce participation.

Supports available to carers

The main services and programs accessed by carers are coordinated across the three tiers of government, a range of portfolios, and are predominately delivered by affiliated service providers. Some programs for carers and care receivers are jointly funded and administered by the Commonwealth, and state and territory governments. For example, specialist disability services under the National Disability Insurance Scheme (NDIS) are jointly funded.
The range of supports available varies between jurisdictions, as does the eligibility criteria, level of engagement required by applicants, payment structure and accessibility. Some of these supports are applicable to working carers, aiming to support those who cannot fully participate in paid employment as much as they would like or need to, and who may need to take extended leave for their informal caring roles.
A snapshot of the support system that working carers may interact with directly or indirectly, is outlined below.

Financial assistance

Australia’s income support system for carers is intended as a social safety net, consisting of a range of payments and benefits. The Department of Social Services (DSS) develops the policies relevant to carers and care receivers, with Services Australia responsible for administering the delivery of payments and related services.1
Income support payments are broadly grouped into allowances, pensions and supplementary payments. Eligibility for payments is usually measured by means testing of incomes and/or assets. There are different eligibility requirements and payment rates for allowances and pensions reflecting the Australian Government’s expectations about the recipient’s engagement with the labour market.2
Under this system, some carers are eligible to receive income support in the form of the Carer Payment, Allowance and Supplement while others may receive social security income support payments such as the Age Pension, Parenting Payment or Disability Support Pension (DSP).3
The Australian Government’s package of Social Policy and Family Assistance Laws, and associated Assistance Guides and Manuals, outline the eligibility, income and asset tests, rates of calculation and all other matters relevant to social security and parental leave payments.4
Brief descriptions of some of the main income support payments and supplementary payments available for carers, as provided for by law, is provided below.

Carer payments

The Carer Payment is open to people who are:
Australian residents caring for someone who is an Australian resident;
caring for one or more people who have care need scores high enough on the assessment tools used for an adult or child;
caring for someone who will have those needs for at least six months; and
be under the pension income and assets test limits.5
In additional to applying for the Carer Payment, carers can apply to receive a Carer Allowance (concerning the provision of additional daily care), if caring for someone with a disability, medical condition, or who is frail aged, and care will be required for over 12 months. There is an income test to receive the Allowance, but no asset test and the payment is not taxable.6
The Carer Payment is both income and assets tested and provides financial assistance to:
… people who are unable to work in substantial paid employment because they provide full time daily care for either someone with severe disability or medical condition, or who is frail aged.7
Further payments are available, such as the Carer Supplement, administered as an annual lump sum payment to assist with the costs of caring for a person with disability or a medical condition, and the Child Disability Assistance Payment, for parents caring for a child with a disability.8


Services Australia assesses the circumstances of both the carer and the care receiver to determine whether a person is eligible to receive carer benefits.
While a number of factors are considered, including the amount of care needed, it is important to note that recipients of the Carer Payment must not work or study for more than 25 hours per week. This includes travel time to get to and from work.9
Further, an income test against a certain threshold also determines any increase or reduction of payments. Income tests assess the applicants and their partner’s income and includes income from all sources. Additionally, the amount of Carer Payment payable to a person is equal to the relevant maximum rate reduced by the amount determined by the income test or by the amount determined by the assets test, whichever is the greater reduction.10
Under the standard rules, for a single person with an income up to $190 per fortnight the full payment is available but reduces by 50 cents for every dollar over $190. For a couple, the payment can be received up to $336 in fortnightly income, reducing by 50 cents for each dollar over $336.11
Eligibility can also be affected by receipt of other supplementary payments, such as Rent Assistance.12

Paid Parental Leave

The Paid Parental Leave Act 2010 provides financial support to eligible working parents of newborn or recently adopted children, via paid parental leave (PPL).13
Under PPL, leave is paid to the child’s primary carer for up to 18 weeks of pay (90 days) based on the rate of the national minimum wage. It includes a continuous PPL period of up to 12 weeks (60 days) and 30 Flexible PPL days which is aimed at helping people balance work and family commitments. The payment is currently $812.45 per week.14
The Flexible PPL scheme applies before or after someone has returned to work for the first time after the birth or adoption of their child, and is available on days where the carer is not working and caring for the child. It must be used after the PPL period and within two years of the birth or adoption. Second carers need to access Flexible PPL both after the primary carer’s PPL and within two years of the birth or adoption.15
Eligible working fathers and same-sex partners are also eligible for two weeks (10 payable days) of leave, paid at the national minimum wage ($812.45 per week, before tax), if they meet the criteria for the ‘Dad and Partner Pay’ scheme. Combined with PPL, this means a family can get a total of up to 20 weeks—or 100 days—of payments.16
PPL, as well as unpaid parental leave and the issues with the parental leave framework are discussed in detail in Chapter 5.

Child Care Subsidy

In July 2018, the Australian Government introduced an amended Child Care Package,17 aimed at assisting ‘parents and carers who rely on subsidised child care to work, train, study or volunteer’.18 The package comprised of the following elements:
Child Care Subsidy (CCS)—the main form of government-funded financial support to parents as a subsidy for child care costs, which is paid directly to child care providers to reduce the fees paid by parents;
Additional Child Care Subsidy—additional fee assistance for families who may face barriers in accessing affordable child care;
Inclusion Support Program—support for services to build the capability to include children with additional needs; and
Community Child Care Fund—grants to child care services in areas of high unmet demand.19
To be eligible for the CCS, a person must:
care for a child 13 years or younger who is not attending secondary school;
be using an approved child care service;
be responsible for paying child card fees; and
meet residency and immunisation requirements.
Access to the CCS depends on the family’s income, the hours of activity the child carer and their partner do and the number of children in their care. Relevant to work and care responsibilities, casual or irregular work hours may affect subsidised hours.20
The CCS also depends on the age of the child, and the type of approved child care which is used, where different hourly rate caps apply.21

Activity test

Notably, the amount provided by the CCS can vary according to family income, hours of eligible activity (for instance work, study/training or volunteering) and the type of care used.22
To access the CCS, applicants must do a recognised activity. These activities can include, among other things—paid work; paid or unpaid leave; unpaid work in a family business; unpaid work experience or an unpaid internship; doing an approved course/study; or actively looking for work or volunteering.23 The number of hours engaged in a recognised activity, determines the maximum number of subsidised child care hours (see Table 4.1).24
Table 4.1:  Subsidised hours of approved child care per fortnight under the Child Care Subsidy activity test
Hours of activity per fortnight
Maximum number of hours of subsidised child care per fortnight
Less than 8 hours
8-16 hours
0 hours if earning above $72 466
24 hours if earning $72 466 or below
36 hours
More than 16-48 hours
72 hours
More than 48 hours
100 hours
Source: Department of Social Services, guides to social policy law, 20 September 2022, (accessed 6 October 2022).
Up to 36 hours of subsidised care per fortnight is available if a child carer’s only activity is volunteering or actively looking for work, and at least eight hours each fortnight is spent doing the activity. In addition, those on the Carer Allowance can access 72 hours of subsidised care per fortnight, and those with mutual obligation requirements can access 36 hours per fortnight (if they are receiving JobSeeker, the Parenting Payment or Special Benefit).25
Family income also determines the percentage of the subsidy available. For those on an income of $0 to $72 446, the CCS is 85 per cent—this is set to rise in July 2023 to 90 per cent for families earning $80 000 or less. Under the current scheme, the CCS progressively decreases to 20 per cent for incomes between $346 756 and $356 756 and to zero for incomes above that amount.26

Other support payments

Parenting Payment

The Parenting Payment is the main income support payment for a young child's principal carer. A single parent, also receiving the Pension Supplement—which is a regular extra payment to assist with utility, phone, internet and medicine costs—is eligible for a maximum payment of $889.20 and a Supplement of $26.20 per fortnight.27
An individual can be eligible for the Parenting Payment if they are caring for a child under eight years old as a single carer, or under six years old if the carer is partnered. The income received during the fortnight will impact the payment amount.
For instance, if a recipient’s income is over the cut-off point of $2 536.60 a fortnight, they will be paid $0 for that fortnight. Additionally, the cut-off point increases by $24.60 per child if the recipient has more than one child.28

Family Tax Benefit

The Family Tax Benefit (FTB) is a two-part fortnightly payment, aimed at assisting with child-raising costs, and based on adjusted taxable income. To be eligible, applicants must:
have a dependent child or full-time secondary student aged 16 to 19 who does not get a pension, payment or benefit;
care for the child for at least 35 per cent of the time; and
meet an income test.29
FTB Part A is paid per child, and FTB Part B is paid depending on a variety of family circumstances. For FTB Part A, the maximum rate per child is:
$197.96 for a child 0 to 12 years
$257.46 for a child 13 to 15 years
$257.46 for a child 16 to 19 years who meets the study requirements
$63.56 for a child 0 to 19 years in an approved care organisation.30
The maximum rate may be available if the family’s adjusted taxable income is below $58 108. The rate reduces by 20 cents for each dollar of income over that amount, but below $103 386. For income over $103 386, the rate is reduced by 30 cents per dollar over, until the payment is nil. There are changes in the amount of payment depending on the number of children in the family, and the family income.31
FTB Part B is paid per family and depends on the age of the youngest child, and income—the payment is not available in single parent families with an income over $104 432, nor can FTB Part B be paid if receiving Parental Leave Pay. The maximum rate of Part B is:
$168.28 when the youngest child is 0 to 5 years of age
$117.46 when the youngest child is 5 to 18 years of age.32
The requirements for FTB Part B are detailed by Services Australia and worth laying out in full:
Partnered parent or partnered carer families can get FTB Part B if the youngest child is younger than 13.
We use 2 part income test to work out your FTB Part B payment. The primary earner is the parent or non parent carer with the higher income. The secondary earner is the parent or non parent carer with the lower, or no income.
Your family won’t be eligible for FTB Part B if the primary earner earns more than $104,432. If they earn less, we work out how much FTB B your family can get using the secondary earner’s income.
The secondary earner can earn up to $6,059 each year before it affects your FTB Part B payment. Your payments will reduce by 20 cents for each dollar of income earned over $6,059.
You can still get some FTB Part B if the secondary earner’s income is below:
$29,985 a year, if the youngest child is younger than 5
$23,360 a year, if the youngest child is 5 to 13.33

JobSeeker Payment

The JobSeeker payment is the main income support payment for unemployed people aged 22 and over, but under the Age Pension age. To be eligible to receive the payment, an individual must be looking for paid work, be under the income and assets test limits, and meet mutual obligation requirements.34
There are different rates of payment based on the recipient's circumstances (for example, single, coupled or an older person). Further, to receive the JobSeeker payment, recipients must meet ‘mutual obligation requirements.’ These requirements involve satisfying an activity test by seeking work or participating in an activity designed to improve a person’s employment prospects. An agreement for each recipient is set out in a Job Plan that can be agreed directly with Services Australia, or through an associated provider.35
To keep receiving the payment, recipients must go to all job interviews, accept any offer of suitable paid work, and not leave a job, training course or program without a valid reason—otherwise, demerits and financial penalties may apply, such as losing half or all the payments or having payments cancelled.36


ParentsNext is a pre-employment service for parents and carers with children who receive the Parenting Payment. Services Australia administers and connects eligible participants with a provider who refers parents and carers to support services.37
The objective of the ParentsNext program is to help eligible38 parents to plan and prepare for employment by the time their youngest child reaches school age, by identifying education and employment related goals and agreeing on activities to ‘help them progress towards these goals’.39 The service is targeted at parents and carers who:
have received the Parenting Payment for the last six months;
care for a child over nine months and under six years of age; and
have not reported paid work to Centrelink in the last six months.40

Activity test

The requirements associated with participation plans and activities are set out in the ParentsNext Guidelines. These guidelines state that a parent who has been identified for participation in ParentsNext is instructed to attend an initial appointment with their service provider.41
Providers are required to provide the parent a participation plan within 20 business days of the initial appointment for agreement.42 Participants then undertake catch-up appointments with the provider to review their personal and family circumstances, update their participation plan, evaluate progress and identify suitable services and activities to meet their needs.43
To keep receiving the payment, ParentsNext providers will advise participants what the requirements are, which may include going to quarterly appointments with the provider; taking part in set activities, and completing the participation plan, which outlines education and work goals, reporting requirements and appointments that have been agreed to.44
Activities which participants may undertake include career counselling; financial management; personal development or presentation skills courses; counselling and mental health services; or assistance with resume and job search skills. A participation plan must include at least one activity, and participants are expected to participate in at least one activity consistently between appointments with their provider.45

Home Care Package

In addition to the establishment of the Child Care Package, a home care package was devised for families with challenging or complex needs, including where families are experiencing challenging situations, and child care services are not able to meet the needs of the child.46 The program is capped at:
… up to 3,200 places, providing up to 100 hours of subsidised care per child per fortnight with a family hourly rate cap, subject to Child Care Subsidy and Additional Child Care Subsidy eligibility criteria.47

Disability Support Pension

Although not a payment for carers, the DSP can be considered as a key source of financial support for some carers,48 and may help those who need to balance work and care responsibilities.
Set out under the Social Security Act 1991, the DSP is provided for:
… people aged 16 years or over with a physical, intellectual or psychiatric impairment that prevents them from working, or being reskilled to work, for 15 hours per week at or above minimum wage for at least two years.49
Recipients can engage in paid employment for up to 29 hours per week without suspension or cancellation of their pension, provided the income test is still met. The DSP can also be paused for up to two years, if a recipient works 30 or more hours per week, or their income reduces their DSP payment to nil for six consecutive fortnights.50

National Disability Insurance Scheme (NDIS)

The NDIS is a national scheme with funding and governance shared between the Commonwealth, state and territory governments.51
The NDIS largely captures people with permanent disabilities that result in reduced functional capacity requiring lifetime support. Persons applying for the NDIS must be aged under 65 when they make an access request.52 More than 4.4 million Australians had a disability in 2018. However, only around 530 000 Australians were NDIS participants, as of 30 June 2022.53
The scheme provides financial support via support packages provided to individual participants based on their needs. This approach ‘allows these individuals to directly engage and manage their own disability support services’.54

Linking programs and services

Existing policies and programs are an integral element supporting carers to balance work and care. However, the effectiveness of these supports is dependent on their accessibility. To streamline access to programs, services and information across three levels of government, online integrated support service models have been developed to connect carers to support systems depending on their circumstances.

Carer Gateway

Carer Gateway is an example of an integrated support service model that provides a range of in-person, online and phone-based support and services to informal carers. The gateway acts as a national single access point to bring together information on various cross-portfolio and geographical services available for carers and care receivers.55
Services include carer support planning, counselling, peer support, carer directed support packages and respite. The services provided by the Carer Gateway are bolstered by the information services provided by the national peak body, Carers Australia.56 In addition, the Carer Gateway provides assistance with navigating relevant, local services available to carers through federal, state and local government and non-government providers, including the NDIS and My Aged Care.57
However, the Department of Health’s My Aged Care service, which provides information on how to access government-funded aged care services, is not currently linked via the Carer Gateway.58

My Aged Care

My Aged Care is also an online integrated support service model that provides older Australians and their carers with resources, services, and support to access and navigate the aged care system. In particular, the platform provides:
information on the different types of aged care services available;
an assessment of needs to identify eligibility for types of care;
referrals and support to find service providers; and
information on financial resources available to alleviate the cost of care.59
From October 2022, carers will be directly referred from the My Aged Care assessment to either the Carer Gateway or National Dementia Helpline according to their caring responsibilities and circumstances.60

Grandparent, Foster and Kinship Carer Adviser service

Originally named the Grandparent Adviser Program, the Grandparent, Foster and Kinship Carer Adviser service was established for grandparents and other non-parent carers who have an ongoing caring responsibility for children. The aim of the service is to provide tailored information about payments and services that are available through state and territory governments and community service providers.61
The service operates a Grandparent Adviser Line, to which more than 23 000 calls were made in 2020-21.62 The advisers of the service provide information about Centrelink, Medicare or Child Support and can arrange appointments with social workers, multicultural service officers, First Nations service officers, financial information service officers and community engagement officers.63

The inadequacy of income support for working carers

The committee has received evidence highlighting how the income support systems around work and care are not fit for purpose and do not properly understand the lived reality of working carers.
When considering the supports outlined above, there are several factors which make it difficult for informal carers to access them, and to use the supports to assist them with transitioning back into and remaining in the workforce. Some of the main concerns include:
limited accessibility to the social security support system due to prohibitive income and activity tests and other requirements;
a limited ability for people balancing work and care to maintain a living wage and to sustain employment in the long term; and
the combination of the above factors locking people out of decent work, reducing household income, and perpetuating a cycle of poverty.
Some case studies drawing on the lived experience of people balancing work and care whilst navigating the income support system were told through submissions to the inquiry.64 Notably, inquiry participants raised concerns about engaging with the income support system and suggested that the system was an active contributor to prohibiting informal carers transition back into, or remain in, the workforce.65
In addition, the complexity associated with navigating the support system to balance employment and caring responsibilities, coupled with trying to maintain a living wage, has led to adverse impacts on carers’ mental and financial wellbeing.
Dementia Australia spoke to the issue of informal carers who had to leave employment due to their caring role, and the lack of adequate access to the social security net. Dementia Australia advised that the challenges of accessing support were told to them by survey participants and included:
… the administrative workload, bureaucratic obstacles, and strict eligibility criteria involved in accessing carer payments. Challenges navigating Centrelink was a consistent theme [from the survey]; for many respondents, the processes involved were experienced as overly complicated, time consuming, and difficult to understand. For these reasons, many respondents reported withdrawing from seeking income support entirely. In addition to the administrative complexities of applying for carer payments, if they were able to access income supports, most respondents reported that the carer payment did not meet the needs of the costs involved in providing care.66
Mental Health Carers Australia (MHCA) described how a lack of systemic supports for informal carers results in a precarious relationship with paid work for mental health carers, and explained that:
This has consequences for their financial security, older age and their health and wellbeing. MHCA would argue that regardless of how much mental health carers wish to support their loved ones, their wellbeing is corroded as economic, political, and social conditions restrict their agency to determine the nature and intensity of their carer role, and their opportunities to meet their wellbeing needs.67
Dr Christopher Bailie and others stressed that those providing unpaid care would like to increase their participation in paid employment but faced barriers to doing so. The submitters explained that carers having difficulty in accessing appropriate employment was often associated with financial stress, noting that:
… employment remains the main source of income for most carers of working age and many would choose to increase their time in formal employment if adequately supported. Only a quarter of carers rely on government welfare payments as their primary income. Almost half of unemployed carers of people with mental illness want to work, and a third of those employed part-time would like to work more hours.68
Similarly, Dr Janet Ramsay described how the complexity of the income support system is just one factor that compounds disadvantages and inequities for ‘women locked into the pernicious nexus of caring and work’.69 Dr Ramsay used a hypothetical case study to outline the impact of government supports on women returning to work:
… If she happens to find it possible to undertake the training or higher education she missed out on earlier in life, our woman will face the challenges of high fees and rigid attendance hours. Then, if seeking to build on her new qualifications, our woman faces the challenge shared by anyone attempting a return to the workforce. If she seeks the assistance of government structures for job seeking, she will be locked into punitive Centrelink requirements and compulsory acceptance of a limited choice of employment.70
The committee also heard that caring responsibilities are locking people out of employment and reducing household income, perpetuating a cycle of poverty. The Antipoverty Centre submitted that vulnerable groups who ‘need income support are increasingly unable to access it, or receive deeply inadequate assistance’.71 The Centre explained that:
People on low incomes including those who rely on social security [are] largely … supporting other people who are in poverty and therefore less able to access fairly paid care. They are more likely to fall into poverty as a result of their unpaid caring duties, and less likely to escape it for the same reason. They may also receive some income from low paid or insecure caring work.
The erosion of social security and the degradation of the social wage across health, education, housing and other sectors is creating unequal access to supports and services, meaning people who need it but have limited financial resources are less able to get help that is available.72
The Antipoverty Centre argued that the social security system was becoming more complex and difficult to navigate, resulting in increased pressure on the social security system itself:
Changes to the social security system over the past decade have restricted access to the DSP, in turn making it harder to access [the] Carer Payment. This has forced hundreds of thousands of disabled people and their carers to rely on unemployment payments (JobSeeker and Youth Allowance Other). These are the lowest payments available to anyone on income support - about half the poverty line.73

Supports prohibiting active employment

In principle, there was support from many witnesses and submitters to increase the CCS, and to do so at the beginning of 2023—rather than waiting until July 2023.74
However, more generally the committee received evidence that income and assets tests and mutual obligation requirements associated with several supports were highly complex and difficult to access, with suggestions that the system is prohibitive to workforce participation for carers. As argued by Carers NSW, while there are a number of policies, programs and supports that aim to assist carers to balance work and care, many of these measures are not currently meeting carer needs or are not inclusive of all carers.75
Additionally, as detailed above, those accessing the Carer Payment are prohibited from working or studying more than 25 hours per week to remain eligible. The committee heard evidence in relation to impacts of this rule, with inquiry participants of the view that the limits placed on work and study have pushed many carers, predominantly vulnerable families, into financial hardship.
Carers Australia suggested that the prohibition on working hours makes it difficult for carers to supplement the Carer Payment, but ‘also to retain engagement in the workforce over time’.76 While Carers Australia accepted the need for a process to determine ‘whether carers are fulfilling the requirement for continuous care’ to be eligible for the payment, it argued that:
Long periods out of the workforce are a major barrier to re-entry when the caring role diminishes or ends, noting a person will also no longer qualify for the Carer Payment. … the rigidity of the 25-hour per week rule must be reviewed to maximise work opportunities, for example, increasing flexibility by changing the rule to 100-hours per month, as recommended by the Productivity Commission.77
Ms Pauline Vamos, Chair of the Policy and Engagement Committee and Board Member, Chief Executive Women, also remarked that accessibility to social security payments has not kept pace with the rising cost of living, which in turn has limited access to employment. Ms Vamos noted that this increasing gap has adversely impacted victims of domestic violence:
We know that 50 per cent of women who are escaping violence rely on government payments as their main source of income. A step to address this would be to reinstate the single parent payment to support sole parents into secure employment.78
The Australian Council of Social Service (ACOSS) called for a ‘move away from the present compliance, “work first” system of employment services towards one that supports people to build work capacity and careers’.79

Prohibitive activity tests

Many submitters voiced concerns about the compliance requirements of the CCS, ParentsNext and similar schemes, reflecting that activity test processes are difficult to navigate—especially for families whose working hours are unpredictable—and work to punish recipients and rather than support them.80
The Secretariat of National Aboriginal and Islander Child Care (SNAICC), speaking from a First Nations perspective, made the important point that families in insecure working arrangements consequently:
… cannot commit to additional hours of work without a guaranteed childcare, but neither can they commit to more than the minimum subsidized hours of childcare if they are at risk of failing the activity test and incurring unsubsidized childcare costs they can’t afford.81
Ms Samantha Page of Early Childhood Australia spoke strongly against activity tests, telling the committee:
The activity test is keeping a lot of families with tenuous workforce participation out of subsidised early childhood education and care. We have quite a specific proposal about collapsing the bottom two levels of the activity test so that all children can have 36 hours a week rather than the current 12 hours a week. But we think that that would remove a barrier.82
While supportive of the CCS increase scheduled for July 2023, Ms Page highlighted that the full benefit of such an increase wouldn’t be realised until the activity test barriers were addressed. Ms Page explained that without removal of the tests:
We are at risk of exacerbating disadvantage for those children that are missing out. We also won't get the full benefit of the increase to the childcare subsidy rates unless we address the workforce shortages.83
Similarly, the Centre for Policy Development (CPD) stressed that barriers posed by the activity test were particularly exacerbated for disadvantaged families, ‘contributing to at least 126 000 children missing out on ECEC, the majority of whom experience disadvantage’.84
UNICEF submitted that by simplifying or removing the activity test for the CCS both social and productivity benefits could be realised, including:
… improved participation from parents dissuaded from working because of the risk of incurring debts, and reduced red tape and improved efficiency.85
The Department of Education did note that there were exemptions to activity tests, but these appear to be limited to where grandparents are undertaking care of children. Ms Michele Arcaro, Assistant Secretary with the Department, advised the committee that for grandparents:
… instead of having to have a particular amount of activity to receive a certain amount of childcare subsidy, grandparents can get an exemption from that also and then are able to access more hours of subsidised care irrespective of the level of activity that they're undertaking.86

Concerns with the tax and transfer system

Some submitters also highlighted the disadvantage which stems from the CCS interacting with tax and transfer system,87 as explained by the Productivity Commission:
For some second income earners (usually mothers) who return to work and use ECEC [Early Childhood Education and Care], the combination of a decrease in Family Tax Benefits, of progressive income tax rates and of reduced Child Care Subsidy at higher income levels, can result in high effective marginal tax rates.88
The Business Council of Australia noted that the tax system acts as a structural barrier for working mothers, referencing:
Reports by KPMG and the Grattan Institute [which] estimated that the additional childcare costs and interactions with the tax and transfer system mean that mothers can lose between 80 and up to 100 per cent of their net pay from working on the fourth and fifth day across the income spectrum. This is a structural barrier which directly impacts on a part-time work choice rather than full-time.89
The Work + Family Policy Roundtable also voiced concerns over the structure of the FTB Parts A and B. Professor Miranda Stewart, a Roundtable member, explained the operation of the FTB in practice and issues with the tax and transfer system, noting that:
… about 20 per cent of families with children are sole-parent headed, and the majority of those, I think about 90 per cent, are female headed households. The withdrawal of family tax benefit A and B—family tax benefit A tapers at 20 per cent to a threshold and then at 30 per cent. So, over a threshold, you start earning income and you lose the transfer at 20c in the dollar and then at 30c in the dollar—and family tax benefit B at 20c in the dollar over a different threshold. The thresholds are a little complex, so that's something to consider. The payments are per child, so the effect differs depending on the number of children in the household.
Because both of those payments for couple households are tested on joint income…that has the effect of the second earner's income being kind of on top of the first earner's income, and it faces, therefore, the higher rate. The second earner is the more responsive, or we would say 'has more elastic labour supply', to be a bit more jargon oriented, and also, at the same time, faces that higher effective tax rate from the withdrawal of benefits.
If there is a primary earner working full time and a second earner coming to work one day a week—with two children under five in this scenario I've given you—we see an effective tax rate on the second earner's day of labour of 50 per cent. That means that the take-home pay is only half the disposable income—after we've adjusted for tax and transfer settings—of the actual earnings for that day.90
Professor Stewart noted the unique challenges of addressing inequities in the FTB system, saying:
The policy challenge in the family tax benefit that the government needs to grapple with is about poverty and inequality. The challenge is balancing adequate payments to low-income families, in particular sole-parent headed families, and a more universal child allowance that would also go to most families, I would say. So you've got fiscal cost issues there, but you've also got to make sure that, in a policy reform, you do not reduce the benefits going to the poorest families.91

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