Optimising the Child Care Subsidy

Financial wellbeing for Australian families 

Analysis by KPMG shows that the current Child Care Subsidy (CCS) should be optimised to support Australia’s economic recovery from the impacts COVID-19. 

Access to affordable and high-quality early childhood education services will be vital to ensure the wellbeing of families and boost the economy.

For many families, it is not financially worthwhile to work an extra day. Analysis looking at how many families would lose 70% or more of their earnings from additional work finds that this affects families in all income levels.

Families who would lose 70% or more of their pay for an extra day’s work:

  • 1 in 5 households earning $67,000-$92,000 
  • 1 in 5 households earning $92,000-$137,000 
  • 1 in 10 households earning $137,000-$198,000 
  • 1 in 4 households earning over $198,000.

Disincentives to work are caused by the combined impacts of additional expenses for children’s care and education, lower subsidies, less family benefits, and higher income tax.

Recommendation: Optimise the current Child Care Subsidy (CCS) to support future recovery. 

The Front Project recommends building on the current CCS to reduce the burden that parents and carers – especially women – have of choosing between work or their children’s learning and development. 

Features to improve the Child Care Subsidy

  • Maximum subsidy increases to 95% of the hourly rate cap, up from 85%.
  • Families with a combined income of $80,000 will be receive the maximum subsidy. This represents two parents earning minimum wage and is increased from $68,000. 
  • The subsidy phases gradually, without sharp changes when income increases.The taper rate decreases by 1% for every additional $4,000 that families earn.
  • All families receive some subsidy, regardless of what they earn.A minimum 30% subsidy for all families.  

Optimising the CCS to enable more parents to work would increase Australia’s GDP by $5.4 billion and support a strong economic recovery from the impacts of COVID-19. 

 

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