Last week I was asked about the new child care subsidy which came into effect from July 2018. My kids are terrible teens but if you’re wrangling the terrible twos along with work and all the bureaucracy of a new system, here are the key things you need to know.
The Child Care Subsidy is administered by the Department of Human Services. To claim, you must have a Centrelink online account through MyGov. The Child Care Subsidy replaces the previous child care rebate and child care benefits systems.
There are some basic eligibility requirements to be met:
- The child must be under 13 years of age and not attending secondary school.
- Parents must meet an activity test.
- Care must be delivered by an approved child care provider and not part of a compulsory education system.
- Immunisation must be up to date.
Crucial to the subsidy is the parents’ “activity test”. This includes paid work (including self employment; paid and unpaid leave); unpaid work in a family business; training courses or approved courses of education; volunteering; unpaid work experience; actively setting up a business or actively looking for work. The number of hours you spent in these activities (your activity level) will determine the number of hours of subsidised child care you are entitled to each fortnight. If you have a partner, the activity level to be considered will be the partner with the lower activity level. For example, if one person works part time for 6 days (45 hours) and the other full time, you will be eligible for up to 72 hours of subsidised care.
The subsidy is paid directly to the child care provider. For the first year, the subsidy will be paid on the basis of an estimate of your family income. The estimate will allow the Department to calculate your Child Care Subsidy Percentage. This percentage determines the amount to be subsidised.
The following table from the Department of Human Services website shows how the percentage is affected by income.
| Your family income | Child care subsidy percentage |
| $0 to $66,958 | 85% |
| More than $66,958 to below $171,958 | Between 85% and 50% The percentage goes down by 1% for every $3,000 of income your family earns |
| $171,958 to below $251,248 | 50% |
| $251,248 to below $341,248 | Between 50% and 20% The percentage goes down by 1% for every $3,000 of income your family earns |
| $341,248 to below $351,248 | 20% |
| $351,248 or more | 0% |
If your family income is less than $185,958 there is no cap on the total subsidy to be paid.
If you family income is more than $185,958 but less than $351,248 you will receive a maximum subsidy of $10,190 per child.
Once your family income is more than $351,248 no child care subsidy will be paid.
Family income is calculated by adding the adjusted taxable income of both partners. Adjusted taxable income is calculated by accumulating:
- Taxable income
- Exempt foreign income
- Total net investment losses
- Reportable fringe benefits
- Reportable superannuation contributions (salary sacrifice superannuation)
- Certain tax free pensions or benefits
- Superannuation income stream benefits.
The department will withhold 5% of the estimated amount of subsidy paid to avoid potential overpayments. Once your tax return has been lodged, a reconciliation will be done to balance the amount of subsidy that you are eligible for. Any additional amounts will be paid.
More information including how to make a claim can be found at the Department’s website.
If you need any help sorting out your finances, I offer a FREE 30 minute initial consultation. You can easily book online here and I look forward to helping you sort your finances!