Unprecedented licence fee hikes threaten childcare viability

Annual National Quality Framework licence fees are set to rise by as much as 1,000 per cent in some states from 1 July 2026, prompting warnings from the Australian Childcare Alliance that services may be forced to cut costs, reduce investment and reconsider long-term sustainability.

The early childhood education and care (ECEC) sector is facing what peak body the Australian Childcare Alliance (ACA) has described as an unprecedented increase in mandatory licence fees.

Under changes agreed at an Education Ministers’ meeting on 20 February 2026, annual National Quality Framework (NQF) fees, which fund regulatory oversight, will increase significantly in several jurisdictions.

The scale and structure of the increases have drawn strong criticism from providers already operating in a challenging financial environment.

From 1 July 2026, providers in Victoria and New South Wales will face the steepest rises, with large privately owned operators subject to increases of approximately 1,038 per cent, effectively multiplying current fees by 11.

Large not-for-profit providers are expected to see increases of around 700 per cent, while smaller providers will experience rises ranging from 242 per cent to 471 per cent, depending on service size and structure.

By contrast, providers in Tasmania, South Australia and the ACT are expected to see increases of around 10 per cent. Services in Queensland, Western Australia and the Northern Territory will reportedly not be affected under the current arrangements.

To illustrate the financial impact, a small private service with fewer than 24 licensed places could see its annual fee rise from $319 to approximately $1,821. A sole owner-operator with more than 101 places may face an increase from $802 to around $4,579.

ACA President Paul Mondo said the magnitude and timing of the increases risk destabilising a sector already under considerable strain.

In its original media statement, ACA noted that the new fees sit on top of existing annual CPI indexation and represent a substantial cost shift rather than a routine administrative adjustment.

The sector continues to absorb rising operating costs, including energy, food, insurance and rent. WorkCover premiums have reportedly more than doubled in some jurisdictions over the past two years. At the same time, occupancy rates in parts of metropolitan Australia have declined due to oversupply.

Providers have also been operating under a government-imposed fee cap for the past 18 months, limiting their capacity to adjust fees in line with cost growth and rebuild liquidity.

For many small, independent providers and community-based services, margins remain tight. Additional regulatory costs, particularly of this scale, may require difficult operational decisions.

The ACA has acknowledged that regulatory authorities require adequate funding to maintain oversight and uphold quality standards under the NQF.

However, the organisation has warned that rapid and substantial fee increases may have unintended consequences.

Licence fees are a fixed compliance cost. Unlike discretionary expenditure, they cannot be reduced or deferred. In an environment where revenue growth is constrained, increased regulatory charges may divert funds away from workforce investment, professional development, learning resources and service improvements.

Quality under the National Quality Standard (NQS) depends not only on compliance oversight, but also on stable staffing, educator capability and adequate resourcing at the service level.

The ACA has cautioned that, combined with ongoing regulatory reforms and financial pressures, the new fee structure could contribute to service cutbacks or increased vulnerability among smaller operators.

While licence fees are payable by approved providers, the broader financial ecosystem of ECEC is interconnected.

Where providers face sustained cost escalation without corresponding revenue flexibility, impacts may include reduced capacity to invest in quality initiatives, constrained workforce conditions or, in extreme cases, service closures.

Any contraction in service availability would have flow-on effects for families, particularly in communities already experiencing limited supply.

The debate now centres on how to balance adequate regulatory funding with the long-term sustainability of service delivery.

As the implementation date approaches, providers will be reviewing budgets, governance structures and risk settings to determine how best to absorb the increases.

For a sector tasked with delivering safe, high-quality education and care under a rigorous national framework, the question is not whether regulation should be funded, but how to do so without undermining the viability of the services it is designed to protect.

For further detail, read the full Australian Childcare Alliance media statement.