Eat, sleep, childcare, work, repeat – is that not how the saying goes? At ABA we know first hand how hard it is to juggle running a business and raising a family. Thankfully, the government offers a range of childcare subsidies to lighten the financial load, but do you know how to get the most out of these subsidies on offer? Let’s dive in.
How does the Childcare Subsidy work?
The childcare subsidy (CCS) amount is determined by:
Household income: The higher your income, the lower the subsidy percentage.
Activity test: The number of hours you and your partner work, study, or volunteer.
Hourly rate caps: The government sets a maximum hourly rate it will subsidize, depending on the type of care your child receives.
Example
Jack and Diane have a combined taxable income of $200,000 and both work full time. Their CCS rate would be approximately 66% (they are out of pocket 33%). They would be entitled to 100 hours per fortnight in childcare to be subsidised.
Their daycare charges $120 per day, and their child goes 5 days a week to a 10 hour daily session. The hourly rate is $12 (which is less than the Centrelink’s hourly rate cap of $14.29 per hour). This means the entire amount is eligible for the 66% rebate. Therefore the total weekly out of pocket cost is $198.
Now, if the daycare were to charge $160 per day, 5 days a week for a 10 hour daily session. The hourly rate would now be $16 which is above Centrelink’s hourly rate cap. Jack and Diane would only get the 66% rebate on the Centrelink $14.29 per hour rate, and the excess would be 100% out of pocket. Therefore the weekly cost to them would be $321.
>>> If your daycare is charging more than the Centrelink hourly rate cap, considering reducing a day of childcare (if you can) and opt for a longer session to bring the hourly rate down.
If Jack and Diane opt for childcare for 4 days and 12 hour sessions per day, the hourly rate above would drop to $13.33 per hour which is now below the Centrelink hourly rate cap. Their weekly out of pocket costs would then drop to $264 per week.
>>> Why not 5 days at 12 hours? Because of the activity test 100 hour limit. You can’t sign up for a 5 days at 12 hours to bring the hourly rate cap down because this would result in more than 100 hours of childcare being provided a fortnight, and then any hours over 100 hours of childcare are out of pocket 100%.
Childcare Subsidy for Multiple Children
Do you have more than one child receiving care? You could receive a higher subsidy for your second and subsequent children.
Example
Jack and Diane from the example above, if they had 2 children, would get 66% CCS for their first child and 80% for their second child. You can see more details in the table below.
Table 1. Childcare subsidy rate for additional children by family income (Source credit: Services Australia)
Your family income | Childcare subsidy percentage for additional child |
$0 to $141,321 | 95% |
More than $141,321 to under $186,321 | Between 95% and 80% The percentage goes down by 1% for every $3,000 of income your family earns |
$186,321 to under $265,611 | 80% |
$265,611 to under $355,611 | Between 80% and 50% |
$355,611, to under $365,611 | 50% |
$365,611 or more | Higher CCS rates no longer apply, all children in the family will get the standard CCS rate |
How can ABA Advice Beyond Accounting help you claim your childcare subsidy?
As a local Sunshine Coast accounting firm, we understand the unique challenges faced by local business owners with young families. At ABA we specialise in helping you navigate tax rules and optimize your returns, including claiming childcare subsidies. Understanding and claiming these childcare subsidies can significantly reduce your childcare costs, easing financial stress and allowing you to focus on growing your business.
If you’d like to learn more about how we can help you grow your business and optimise your childcare subsidies, book a Free Discovery Meeting today.