Everything You Need to Know About the Child Care Subsidy
A step-by-step guide for parents, plus our easy-to-use child care subsidy calculator.
Finding a childcare provider can be daunting for new parents—but so can understanding, applying for, and managing the Federal Government’s Child Care Subsidy.
In this article, find out how to ensure you receive the most benefit and discover four top tips for parents from Kool Kidz Child Care General Manager Annette Tierney.
What is the Child Care Subsidy?
According to Annette, “the child care subsidy is a Commonwealth contribution to assist families in subsidising the cost of child care. Through the subsidy, the government contributes a portion of the childcare fee.
Each eligible family must apply for the subsidy through Services Australia (Centrelink), and their personal circumstances are assessed to determine their eligibility and level of subsidy.”
What determines eligibility for the Child Care Subsidy?
To receive the subsidy, you must:
- care for a child 13 or younger who’s not attending secondary school (unless an exemption applies)
- use an approved childcare service
- be responsible for paying the childcare fees
- meet residence and immunisation requirements
Two main requirements impact the subsidy: your household income, which determines the subsidy rate, and how involved each parent is in approved activities.
Additional criteria assessed include:
- the hourly rate cap based on the type of approved child care you use and your child’s age
- the number of children in your care
The amount of subsidised child care you can access per fortnight applies to each child.
To get started, you can calculate your rate using the Kool Kidz child care subsidy calculator here.
The Child Care Subsidy Breakdown
According to Annette, “The goal when applying for the subsidy is to determine how much subsidy is paid and for how many hours the subsidy is paid.”
For example, if both you and the other parent work full-time, you may be eligible for 100 hours per fortnight. Your children can attend full-time care at a rate determined by your total income.
The Child Care Subsidy is a percentage of the total childcare fee. However, the percentage can be confusing, as many factors contribute.
If your household income is $150,000 and you receive a 76% subsidy, it might not translate to 50% off the full fee. This is due to several factors, including:
- A 5% withholding fee is applied to everyone receiving the subsidy to ensure you are not overpaid.
- The hourly cap granted by the government is currently $13.73 per day versus the hourly rate charged by the childcare centre.
Your child’s CRN (Services Australia Customer Reference Number) is connected directly to your childcare providers software so that the rate can be automatically applied.
The gap fee is your contribution to the remaining balance after the subsidy is applied and paid by you directly to your childcare provider.
According to Annette, “It depends on the service, but the gap fee is billed every week or fortnightly. Some are paid in arrears or in advance, but again, this depends on the centre.”
Once your yearly tax return is completed and your income is confirmed, any CCS balance will be added to your bank account connected to Services Australia, and you will be refunded the 5% withholding fee.
4 Top Tips for New Families
1.Apply early
Once you start considering child care, apply for the subsidy through MyGov. The application process can take up to six weeks or two months. Getting your application in sooner rather than later will save you time and ensure you receive the subsidy when your child begins care.
You don’t need to know which centre your child attends to begin the application process. Once your application is in and your CCS is approved, it will simply be linked to your chosen childcare centre.
2.Understanding the activity test
Part of the subsidy process involves an activity test, during which you declare how many hours you worked, studied, or volunteered.
When on maternity leave, ensure you declare that you are working full-time as you are still technically employed—just not working at that job. Not understanding this can shoot you in the foot, as your payment will be rejected, and you will need to contact Services Australia.
In the system, an activity may not include all possibilities when you enter the hours. Recognised activities include self-employed, paid or unpaid leave (maternity), unpaid work in a family business, unpaid work experience or internship, activity setting up a business, approved study, training, actively looking for work and volunteering.
Be sure to find out what counts as an activity, and make sure you are claiming all your activities.
3.Ensure your income is accurate.
It’s better to overestimate your income than to underestimate it. When you file your taxes, if your subsidy was paid based on a lower income amount, but it turns out you earned more, you will owe a balance if it exceeds the 5% withholding fee.
Whereas, if you declare a lower income amount, you will receive a payment after you file taxes, including the 5% withholding fee plus any additional subsidy amounts owed based on your income.
But it’s always best to be as accurate as possible with your income.
4.Troubleshooting and privacy
Since your account with Services Australia is private, your childcare centre cannot contact Services Australia on your behalf if there are payment issues. You will need to contact Services Australia directly to resolve the issue.
Changes to the Child Care Subsidy
The Child Care Subsidy is adjusted yearly based on the Consumer Price Index.
In 2023, the maximum subsidy percentage increased from 85% to 90%.
Families earning $83,280 or less will get a 90% subsidy.
Families earning over $83,280 and under $533,280 will get a subsidy that tapers down from 90%, depending on their income. The subsidy will go down 1% for each $5,000 earned.
Families with more than one child aged five or under in care can still get a higher rate for their second and younger children of up to 95%
Aboriginal and Torres Strait Islander children are automatically eligible for a minimum of 36 hours of Childcare Subsidy regardless of activity test.
If you have any questions about our childcare services or understanding your child care subsidy, don’t hesitate to get in touch or contact your nearest Kool Kidz Childcare Centre.
More Resources for Parents
*Annette Tierney has been working with Kool Kidz Childcare for the last four years and is now the GM. Annette is deeply involved with operations and has a thorough understanding of CCS and how it works.
