Government confirms plans to improve childcare affordability via CCS changes

The Federal Government has confirmed that it will make a series of changes to the Child Care Subsidy system targeted at improving the affordability of early childhood education and care that are to be announced in next weeks Federal Budget.

The changes are designed to alleviate structural disincentives built into the system that negatively impacts the amount of subsidy some families are eligible to receive and will see affordability rates for these families substantially improve, which is hoped, in turn, will feed through to higher female work force participation rates.  

The Treasurer Josh Frydenberg said “This is a targeted and proportionate investment that simultaneously makes child care more affordable, increases workforce participation and boosts the Australian economy by up to $1.5 billion per year.”

Families with more than one child and those earning >$189k per year key beneficiaries 

The proposed changes have been targeted at two broad cohorts of families, those with more than one child attending an early childhood education and care service and those that are earning more than $189,390 per year. 

The key changes for those families are as follows, with all other families outside of these cohorts seeing their CCS arrangements remain the same: 

• Eligible families with more than one child attending an ECEC service will see the level of subsidy received increase by 30 per cent, to a maximum of 95 per cent of fees, for their second and subsequent children. 

• Eligible families that have combined incomes above $189,390 will not have to start paying full fees after they have reached the subsidy cap of $10,560 per child per year because the subsidy cap will be removed. 

The Government estimates that around 268,000 families in total will benefit from these measures and anticipates they will support around 40,000 parents to work an extra day per week as a result. 

Minister for Education and Youth Alan Tudge said the measures would further ease the cost of child care and encourage workforce participation, particularly for larger families.

“These measures will help remove the barriers for parents, particularly mothers, to return to the workforce or to increase their hours, as their family grows.” 

Changes wont come into effect until 1 July 2022 – OSHC families not to be included 

The proposed changes will be included in the 2021/22 Federal Budget which is to be handed down to Parliament on 11 May 2021 however, they will not be implemented until next year on 1 July 2022.

It is unclear at this juncture precisely why the Government has elected to defer the implementation for 14 months although it is understood that complexities around adjusting the CCS IT system and surrounding processes is largely to blame.

Also it’s worth noting that Outside School Hours Care has not been included in this package. 

To read the Government statement please click here.