Everything you need to know about the childcare funding changes.

The government is making major changes to the way it funds childcare – and parents need to be aware of it.

The government wants to spend an extra $3.2 billion on childcare and substantially change how the subsidy system works so thousands of families see more support from the government to meet their childcare costs.

The new childcare legislation has been introduced into Parliament on the face of it, it looks pretty good.

No more mention of lowering educator qualifications or educator to child ratios in order to save money. The government has confirmed they’re committed to the National Quality Framework which ensures the educators working with our kids are highly skilled and qualified. Tick.

ChildcarePainting istock Feat FB
“There are some hidden nasties and reports suggest that as many as one in four families will actually be worse off, some significantly so.” (Image via iStock)

There’s plans to remove the $7,500 yearly subsidy cap for families with incomes below $185,000 and increasing it to $10,000 for families earning above that. Tick.

The top government subsidy percentage is increasing from about 75 per cent to 85 per cent for low income working families. Tick.

In fact, the government tells us that the majority of families using childcare will be about $30 a week better off. Great!

But, there are some hidden nasties, with some reports suggesting that as many as one in four families will actually be worse off, some significantly so.

The government tells us that the only way to fund the $3.2 billion extra for childcare is through cuts to family payments and paid parental leave. Making childcare affordable for some families by asking other families to pay – robbing Peter to pay Paul – is simply unfair and wrong.

But back to the subsidy changes.


There will now be a stricter ‘activity test’ where all parents in a family will have to be engaged in a minimum level of “approved activity” to be eligible for the government’s childcare subsidy.

This is much stricter and more limited than is currently the case where everyone, irrespective of working arrangements, gets some level of subsidy to help meet the costs of the childcare and early learning their kids receive.

Subsidies will now be offered in three blocks: those who have both parents in ‘work’ 8-16 hours a fortnight will get up to 36 hours of subsidised childcare a fortnight, those who work 17- 48 hours will get up to 72 hours and those who work 48hrs plus will get up to 100 hours a fortnight.

More contact with an overly stretched Centrelink – we all need that like a nail in the head.

Families who have household incomes less than $65,000, including children from disadvantaged and vulnerable backgrounds will still get access to subsidised childcare irrespective of the new activity test. However, they’ll only get about half the amount of subsidised childcare compared with what they get now (24 hours down from 48).

Parents will have to regularly notify Centrelink the hours they work and report any changes in hours and household income to make sure they are only receiving the number of hours of subsidised care they “need” and therefore are eligible for.

More contact with an overly stretched Centrelink? Close to a nightmare for any parent familiar with what this entails.

The reality is that the subsidy changes won’t really affect parents who are your typical nine to fivers and who only use childcare for the days they work.

But sole income families and parents working irregular hours or whose hours are unpredictable, like mums working casual shifts as they slowly return to work from maternity leave, are likely to experience some angst.

For parents with irregular work hours, apart from the need to update and adjust records all the time with Centrelink, it’ll likely affect your ability to afford your child’s regular access to childcare. Some weeks you’ll get the full subsidy some weeks you may not be eligible and therefore be left to foot the full bill for childcare.

Jamila Rizvi on returning to work after the birth of her son (post continues after video):


This is a problem because, as we all know, irrespective of what’s happening work wise – when you get your childcare days you keep your childcare days as they were likely very hard to secure in the first place!

What happens to families who have a parent who isn’t in paid work, study or some other ‘purposeful’ activity? Well if the sole income earner in your family earns more than $65,000 – you’ll now get nothing from the government. You’re deemed as having someone free and available to care for your children. So if you want them to access early learning then you’ll have to pay full price for it or get a job.

LittleGirlCHildcarefeatfb Istock
“Childcare is early learning.” (Image via iStock)

On the face of it this strict “you get subsidy for the childcare you need to work” makes sense. Surely only parents who work should get government money right?

Well, if the only purpose and benefit of childcare was workforce participation then yes this may make sense. But it’s clearly not.

As many parents know – and I am absolutely one of them – childcare is early learning. My daughter Gwenevieve goes to childcare because my husband and I work but more importantly, she goes so she can benefit from access to high quality early learning.

In fact, children accessing early learning is arguably where government gets its best bang for buck when it comes to the billions they spend on childcare each year.

Most other countries across the developed world are investing large sums of money in Early Childhood Education and Care (ECEC) because of the the long term social and economic benefits of quality early learning, not just for workforce participation.

Countries, like Britain, New Zealand, Canada, Norway and Germany are all spending up big to ensure their children can get free or close to free access to early learning. They do this to increase the skills and education of their populations.


Not only does it make social sense to have a more educated society but it makes economic sense too – with government saving in welfare, health and justice expenditure far outweighing the cost of a quality ECEC system that is accessible (i.e. affordable) for all.

However, increasing workforce participation is absolutely a valuable feature of an affordable early learning and care system. So can we stop talking about government helping families to pay for childcare as welfare support because it’s not.

It is a productivity driver; a recognition that if we want more people working now, importantly more women in the paid workforce now AND the skilled workforce for the future, we need our government to help pay for it for ALL families.

So this is where I’m likely to lose a few interested readers because I’m about to argue why it’s important to keep a meaningful childcare subsidy for high income earners.

For families who earn more than $250, 000 a year they are about to see their subsidy drop from 50 per cent down to 20 per cent. And while I’m not asking for sympathy for the top end of town it’s a poor assumption to make that this cut in subsidy won’t affect these families, in particular the women in this families.

Let’s be frank, the cost of childcare remains the cost of mum going back to work. The decision as to whether or not she goes back to work is made based on how much of her wage will be consumed by childcare fees.

When the cost of childcare in inner Sydney, Melbourne and Brisbane rivals that of the most expensive private schools, what incentive is there for women, including well paid professional women, to go back to work before their children reach school?

It can be upwards of $40 000 a year, even after government subsidies, so why bother going back to work? Why bother going back fulltime? Why bother going for that promotion when it will likely mean you’ll be left with a bigger childcare bill because of it?

The government needs to ensure the cost of childcare is an incentive, not a disincentive for women returning to paid work. We don’t need another barrier or women thinking it’s easier and more cost effective to wait until their youngest child reaches school to then re-enter the paid workforce.

Highly skilled, professional women are those we as tax payers have invested a lot of money in by way of their skills and education. So we want to incentivise them to work, (and therefore pay a lot of tax), whilst having a family, not make it so difficult they take a big chunk of time out of work when their kids are young.

Here’s a quick question – we don’t means test public school education and the government spends a lot to subsidise the cost of private school education, so why should education received prior to school be any different?

LittleGirlSchool iStock Feat FB
“Why should education received prior to school be any different?” (Image via iStock)

Just a thought.

But as I said, there is much to like about the government’s new childcare package and we mustn’t lose sight of the fact they are about to make childcare more affordable for more families.

However, with such a narrow focus on workforce participation (and only the kind that is your typical nine to five, at the lower to middle income brackets) we could be about to miss out on the opportunity to make a significant difference to the skills and education of our future generations.

If the changes go through as they are – children will be shut out of early learning missing out on the incredible benefit that this brings to their learning and earning capacity later in life. And many mums will continue to find it difficult to re-enter the workforce or build their careers due to the cost of childcare or the seemingly complicated “activity test” eligibility system.

And if that’s the case, we’ll all be the poorer for it.

Good news though! There is still an opportunity for improvement. The legislation has been given to a Senate Committee for investigation and review and they have asked the public to give feedback by way of submissions.

The Parenthood is working to ensure politicians hear directly from parents. We currently have a survey live that enables parents to give their feedback on the proposed changes – the results of which will formulate our submission to the Senate Committee.

If you want to have your say – go to for more details.