This years’ budget did not produce any real surprises for our sector, in fact the overall proposed changes are positive for families and providers.
The introduction of yet another way to administer childcare subsidies and labelling them something new once again is no real surprise. The current Child Care Benefit and Child Care Rebate will now be called the “Child Care Subsidy”, this new combined single payment will also be means tested.
On a positive note the government is pledging to spend an extra $2.5 Billion for our sector, keeping in mind this still has to be passed in the Senate.
The proposed breakdown of families receiving the Child Care Subsidy is based on their combined family earnings. I support the basic rationale adopted by the government that families earning the lowest incomes will and should receive the highest amount of Subsidy, then as you earn more you receive less assistance with childcare fees.
It makes sense that families with lower incomes are not further disadvantaged, so providers located in areas with lower socio-economic demographics can still afford to charge reasonable rates provided they are offering high quality care and education services to families.
I still believe that the families earning incomes above $340K can still comfortably afford our services, however their expectations as parents will always be very high.
Please refer to the information below for a summary of the proposed subsidy paid based on family income.
It is a further win for families earning up to $185K as they will not have a cap imposed based on how much subsidy they receive. Families earning more than $185K will now be capped at $10K instead of $7K – another win.
In my view this budget is once again very positive for the general childcare sector across the board. It is also my opinion that throughout the Kool Kidz network we should not experience any real negative financial consequences or declining occupancy levels as a direct result of this budget.
Our industry is currently viewed as the “boom business” and at least for the last five years this has been the case. We have many new services being developed and licensed at the moment across Melbourne, resulting in more choice for families and an increase in competition for our group. I expect that in the near future supply will meet and perhaps exceed demand in some areas, however I am a firm believer in our owner operator model providing superior quality care and education services hence will always be the first choice for families.
Budget 2017 – Summary for Families
$2.5 billion more in early learning and child care, including the new system of fee subsidies
How will the Government administer payments to families going forward ?
Currently the Government provides two payments to families to help with child care costs: the means-tested Child Care Benefit and the Child Care Rebate, which is not means-tested.
The proposal is to create one means-tested payment instead, called the Child Care Subsidy.
How will this affect families?
Families on the lowest incomes will receive the highest amount of subsidy.
Families earning less than $65,000 will receive a subsidy covering up to 85 per cent of their costs.
For families earning between $65,000 and $170,000 the rate will gradually taper to 50 per cent of costs.
From $170,000 to below $250,000 the rate of subsidy will be 50 per cent of costs.
From $250,000 to below $340,000 the rate will gradually taper down to 20 per cent.
Families earning more than $340,000 will receive a subsidy covering 20 per cent of costs.
The Government also wants to lift the yearly cap on the amount of Child Care Subsidy that can be paid to families.
The cap will be lifted entirely for families earning up to $185,000. For families earning more, the cap will be lifted from the existing $7,500 a year to $10,000.
What will families have to do to qualify?
The bill includes an activity test that both parents have to meet before they can receive any subsidy from the Government.
Parents will have to be working, studying, training or volunteering for a minimum of eight hours a fortnight. The more parents work, the more subsidy they are eligible to receive.
Is there a safety net?
Yes. Families earning less than $65,000 a year who fail the activity test will still be eligible for 12 hours a week of subsidised child care.
But that is half the hours they are guaranteed under the current system.
What are the sector’s concerns?
The early childhood sector is worried about the impact of the activity test on disadvantaged families.
It wants the minimum guaranteed hours a week increased to 15 hours instead.
Why is child care linked to welfare cuts?
The Government argues that the increased spending on child care must be paid for by cutting some family tax benefit payments.
But critics argue the two are linked purely for political reasons and the package should be paid for by cuts in other areas instead.
Kool Kidz Licensor
Sources: ABC News, Herald Sun