Your combined family income is one of three key factors that determines how much Child Care Subsidy you will receive. Generally, as family income increases, the amount of Government subsidy decreases.
The other two factors determining your Child Care Subsidy is your fortnightly activity – such as work, study or volunteering, and the type of service your child attends*.
Understanding the Child Care Subsidy can be confusing at times. So, it’s worthwhile getting a good understanding of how the subsidy is calculated and how it may impact your child care payments.
Here’s a breakdown of the percentage of subsidy the Government will contribute to your child care based on your combined family income:
The Government has set a rate cap for different types of child care services. For centre based care it is $11.98 per hour, for children attending family day care it is $11.10 per hour and for children attending outside school hours care it is $11.98 per hour.
The government will pay a percentage of child care subsidy up to the relevant rate cap. Some services will charge above the relevant rate cap and some services will charge below the relevant rate cap.
For long day care, the child care subsidy will be paid as a percentage up to $11.98 per hour. This means if your service charges above $11.98, the subsidy will only be applied to the $11.98 per hour, and families will be responsible for paying the remaining gap.
Scenario: Family with a combined family income of $65,000 and entitled to a subsidy of 85% and meets the activity test.
Family 1 is charged $110 per day for a 11-hour long day care session – that is, $10 per hour. As this is less than the maximum hourly rate cap of $11.77, the percentage of subsidy (85%) will be based on what they pay - $10. The family would be entitled to a subsidy of $8.5 per hour. The family’s out of pocket costs would be $1.50.
Calculation:
85% x $10 = $8.5 per hour;
$10 - $8.50 = $1.50. This means that the family’s out of pocket expenses would be $1.50 per hour of care.
Family 2 is charged $150 per day for a 12-hour session – that is $12.50 per hour. Because this is more than the maximum hourly rate cap of $11.77, the family would be entitled to a subsidy of 85% of the capped rate of $11.77. This means that the family’s out of pocket expenses would be $2.50 per hour of care.
Calculation:
85% x $11.77 = $10.00 per hour;
$12.50 – $10.00 = $2.50
This means that the family’s out of pocket expenses would be $2.50 per hour of care.
If your total combined family income is $186,958 pa or less, you won’t have an annual cap on your subsidy.
If your family earns between $186,958 and $351,248 the Government will cap your subsidy. This means they will subsidise your fees up to the annual cap of $10,190 per child each financial year.
The easiest way to estimate your income is to base it on your previous year's tax return as well as any expected pay rises.
Note that 5 per cent of your weekly Child Care Subsidy entitlement will be withheld by the government. Following reconciliation of your tax return at the end of the financial year, any amount owing to you will be paid as a lump sum by the government. If you have been paid too much Child Care Subsidy, you will have a debt to repay.
To get a better understanding of what is considered income, we recommend you visit the ATO website and search for Adjusted Taxable Income.
*There are also eligibility requirements to receive Child Care Subsidy for a child (such as immunisation and residency requirements).
^References to the hourly rate cap, income thresholds and annual cap are correct for 2018/19 and may be subject to adjustment through indexation in subsequent years.
Source: Information sourced from the Department of Education and Training https://www.education.gov.au/ChildCarePackage
The other two factors determining your Child Care Subsidy is your fortnightly activity – such as work, study or volunteering, and the type of service your child attends*.
Understanding the Child Care Subsidy can be confusing at times. So, it’s worthwhile getting a good understanding of how the subsidy is calculated and how it may impact your child care payments.
Rates of subsidy based on your combined family income^
Here’s a breakdown of the percentage of subsidy the Government will contribute to your child care based on your combined family income:
- Families earning $68,163 pa or less will receive a subsidy of 85% of their child care fees up to the rate cap of $11.98 per hour.
- For families earning between $68,163 to under $173,163 pa, the subsidy gradually tapers down from 85% to 50%, receiving 1% less for every $3000.
- Families earning $173,163 to under $252,453 pa will receive a subsidy 50% of their fees.
- For families earning $252,453 to under $342,453 pa, the subsidy gradually tapers down from 50% to 20%, receiving 1% less for every $3000.
- Families on $342,453 to under $352,453 pa will receive a subsidy of 20% of their fees.
- Families earning $352,453 pa or more will receive no subsidy.
Hourly rate caps based on the type of child care service
The Government has set a rate cap for different types of child care services. For centre based care it is $11.98 per hour, for children attending family day care it is $11.10 per hour and for children attending outside school hours care it is $11.98 per hour.The government will pay a percentage of child care subsidy up to the relevant rate cap. Some services will charge above the relevant rate cap and some services will charge below the relevant rate cap.
For long day care, the child care subsidy will be paid as a percentage up to $11.98 per hour. This means if your service charges above $11.98, the subsidy will only be applied to the $11.98 per hour, and families will be responsible for paying the remaining gap.
Examples of how the hourly rate caps are calculated
Scenario: Family with a combined family income of $65,000 and entitled to a subsidy of 85% and meets the activity test.Family 1 is charged $110 per day for a 11-hour long day care session – that is, $10 per hour. As this is less than the maximum hourly rate cap of $11.77, the percentage of subsidy (85%) will be based on what they pay - $10. The family would be entitled to a subsidy of $8.5 per hour. The family’s out of pocket costs would be $1.50.
Calculation:
85% x $10 = $8.5 per hour;
$10 - $8.50 = $1.50. This means that the family’s out of pocket expenses would be $1.50 per hour of care.
Family 2 is charged $150 per day for a 12-hour session – that is $12.50 per hour. Because this is more than the maximum hourly rate cap of $11.77, the family would be entitled to a subsidy of 85% of the capped rate of $11.77. This means that the family’s out of pocket expenses would be $2.50 per hour of care.
Calculation:
85% x $11.77 = $10.00 per hour;
$12.50 – $10.00 = $2.50
This means that the family’s out of pocket expenses would be $2.50 per hour of care.
Annual subsidy cap
If your total combined family income is $186,958 pa or less, you won’t have an annual cap on your subsidy.If your family earns between $186,958 and $351,248 the Government will cap your subsidy. This means they will subsidise your fees up to the annual cap of $10,190 per child each financial year.
How do I calculate and report my income?
You will need to submit a new claim for Child Care Subsidy if you have recently started using child care or if you claimed child care fee assistance as a lump sum in 2017-18 and wish to receive the new Child Care Subsidy in 2018-19.
You can submit a new Child Care Subsidy claim using your Centrelink online account through myGov.
Your subsidy percentage will be based on your estimated combined annual family income. Your actual subsidy entitlement will be worked out at end of year reconciliation when your actual adjusted taxable income is known (after you have lodged your tax return).The easiest way to estimate your income is to base it on your previous year's tax return as well as any expected pay rises.
Note that 5 per cent of your weekly Child Care Subsidy entitlement will be withheld by the government. Following reconciliation of your tax return at the end of the financial year, any amount owing to you will be paid as a lump sum by the government. If you have been paid too much Child Care Subsidy, you will have a debt to repay.
To get a better understanding of what is considered income, we recommend you visit the ATO website and search for Adjusted Taxable Income.
Want to get a subsidy estimate?
You can try our simple subsidy estimator to get an idea of how much child care subidy you could expect to receive – click here to use the estimator.
*There are also eligibility requirements to receive Child Care Subsidy for a child (such as immunisation and residency requirements).
^References to the hourly rate cap, income thresholds and annual cap are correct for 2018/19 and may be subject to adjustment through indexation in subsequent years.
Source: Information sourced from the Department of Education and Training https://www.education.gov.au/ChildCarePackage