Removing the CCS activity test would help 126,000 children access ECEC, report finds

Removing the activity test on the Child Care Subsidy (CCS) would boost the number of women in the workforce, and support at least 126,000 children from vulnerable families to access early childhood education and care a new report has found. 

 

Prepared by Impact Economics and Policy, the Child Care Subsidy Activity Test: Undermining Child Development and Parental Participation report shows that the current activity test is contributing to at least 126,000 children from the poorest households missing out on critical early learning opportunities.

 

The activity test restricts the number of hours of Child Care Subsidy a family is entitled to based on the ‘recognised activity’ parents are engaged in. ‘Recognised activity’ can include work, training, studying or volunteering. The fewer the hours of activity, the less the amount of subsidised childcare. There is a minimum entitlement of 24 hours of childcare per fortnight – equivalent to one day per week – for families earning less than $72,466 a year.

 

Families must update their activity regularly to ensure they are not overpaid, creating a significant compliance burden and risk of overpayment for impacted families. A 2019 survey found half of the parents taking advantage of the minimum entitlement were worried that they would end up with a reconciliation debt if they did not get their details right. This is particularly important for casual employees, who often do not have certainty over their hours of work.

 

Removing the activity test, Impact Economics lead economist Dr Angela Jackson said, would deliver significant benefits including greater access to early learning for low income children, improving participation, and reducing red tape.

 

Given that children from low income families are more than twice as likely to start school developmentally vulnerable compared to children from high-income families, access to high-quality early learning experiences are a core component of combating this inequality.

 

Dr Jackson described the activity test as “unfair and inefficient” calling on the Government to remove it and “take a step towards universal childcare”.

  

Government figures show that the number of low-income families accessing childcare has fallen by 42,000 since the new system was introduced in 2018. 

 

The previous Government halved the minimum amount of childcare that low-income families are entitled to from two to one day a week, and has resulted in this substantial fall in the number of families receiving the minimum entitlement.

 

An independent evaluation of the changes by the Australian Institute of Family Studies in 2022 found that the new activity test has “disproportionately impacted on children in more disadvantaged circumstances” and recommended that it be reviewed. 

 

“Access to subsidised childcare influences decisions around work and study,” Dr Jackson explained.

 

“Removing the activity test will reduce the complexity of the system and the risk of overpayments, removing barriers faced by low-income casual employees seeking to increase their hours of work.”

 

Child Care Subsidy Activity Test: Undermining Child Development and Parental Participation is available online, and a copy for review was provided to The Sector.