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One million families to benefit from child care reforms



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SENATOR THE HON SIMON BIRMINGHAM Minister for Education and Training Senator for South Australia

MEDIA STATEMENT

30 January 2016

One million families to benefit from child care reforms

Almost one million Australian families will benefit as a result of the Turnbull Government’s Jobs for Families package.

The Government’s new child care package includes more than $3 billion in additional funding and will support around 1.2 million families in 2017-18 as they balance work and family responsibilities, as well as protect those most vulnerable, and continue to ensure a high-quality learning experience.

Our objective is to better help parents who want or need to work, or who want to work more, while still supporting early childhood education. More affordable access to quality child care puts the opportunity of work within reach for more families.

Unfortunately, significant investment over recent years has not resulted in the flexible, accessible and affordable child care system that today’s modern families require.

The Jobs for Families package seeks to address these concerns and create a much fairer system - it provides the highest rate of subsidy to those on the lowest income levels and more hours of subsidy to those who work the most hours. It targets around $40 billion in support to families who most depend upon child care in order to work, or work more.

From July 2017, family eligibility for the Child Care Subsidy will be determined by a three-step activity test that more closely aligns hours of subsidised care with the combined amount of work, training, study, volunteering or other recognised activity undertaken. The entry point to the activity test is set at a very low base of only four hours of activity per week. These four hours of activity will result in families being eligible for 18 hours of subsidised child care.

The Turnbull Government stands by the principle that child care support, heavily subsidised by the taxpayer, must give preference to those who are working, training, studying or volunteering, while being complemented by universal access to preschool education and extensive early education support for disadvantaged children.

The Turnbull Government reforms will also put downward pressure on the escalation in child care costs, which is in stark contrast to Labor’s record of creating a less affordable child care system for Australian families.

According to the Productivity Commission, Labor’s 2008 increase in the Child Care Rebate from 30 to 50 per cent, without a check on what centres could charge, led to an acceleration in fee increases. In contrast, our reforms will set an price against which subsidies are paid, which will be indexed to CPI.

Government expenditure on early childhood education and care

Page 115, Productivity Commission Inquiry Report into Childcare and Early Childhood Learning

Long term, this will prove invaluable for families and taxpayers, ensuring the rapid growth in child care costs does not continue.

Lower income families: From July 2017, about 250,000 families earning $65,710 or less per year will have access to a subsidy rate of 85 per cent of their fee, which is up from their current subsidy rate of around 72 per cent. The majority of these families will be better off (about 104,100) or will experience no change (about 81,000). There are approximately 12,800 families on income support who have not reported their income - without this information it is difficult to determine how these families will be impacted.

About 52,100 families in this income bracket will receive a reduced subsidy because they are not working, training, studying or volunteering, but still be eligible for 12 hours a week of subsidised access to early learning opportunities, in addition to the universal preschool entitlement. All of these families can access more hours of subsidised child care simply by undertaking recognised activity for as little as four hours a week, or increasing their current level of activity.

Low to middle income families The subsidy rate tapers from 85 per cent for families earning more than $65,710 to 50 per cent for those earning $170,710. In this income bracket, families will, on average, be about $1500 a year better off. Around 565,400 families will be better off and a further 32,800 will experience no change in support. These families will particularly benefit from the removal of the annual $7,500 cap, which applies universally today, but will only apply for families with incomes of more than $185,710 under the new Package and is being increased to $10,000. Together with the more generous Child Care Subsidy, this is another win for low to middle income families.

It is anticipated that many of the around 55,700 families in this income bracket who may receive a reduced amount of support will either increase their activity or move to lower cost child care services. These families may receive reduced support because they do not meet the activity test and/or pay child care fees that are in excess of the new hourly fee caps. The hourly fee caps are a necessary measure to arrest incessant child care fee increases.

Upper income families The Child Care Subsidy tapers to 50 per cent for family incomes of $170,710. It then remains at 50 per cent until family income reaches $250,000. Around 142,400 families earning between these amounts will be better off under the new Package, while a further 19,500 will experience no change. About 16,600 will receive a reduced level of child care support, mainly because they are paying child care fees in excess of average costs.

High income families For high income families earning $250,000 or more, the subsidy reduces from 50 per cent to 20 per cent at $340,000 and above. As a result, around 59,500 families earning more than $250,000 a year will receive less Child Care Subsidy under the proposed arrangements. In this income bracket, around 7,200 families will experience no change while about 3,800 families will be better off.

Senator Birmingham’s media contact: James Murphy, 0478 333 974 Nick Creevey, 0447 644 957

Department Media: media@education.gov.au

ENDS