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Monday, 22 October 2018
Page: 10539

Child Care

Dear Mrs Wicks

Thank you for your letter of 21 May 2018 regarding petition number EN0495 requesting that child care fee assistance for partnered couples be based on single income, not combined income.

The primary role of the Australian Government in relation to early childhood education and care is to provide families with financial assistance to help cover the cost of child care and to encourage workforce participation. The Government is investing an additional $2.5 billion into the new child care package to provide more support for families, including a $1.2 billion Child Care Safety Net. The centrepiece of the new package, the Child Care Subsidy (CCS), commenced on 2 July 2018 and is designed to encourage families to participate in the workforce and provide more targeted support to lower and middle income families.

As the petitioner is aware, the percentage of subsidy a family is entitled to, is based on combined annual family adjusted taxable income. Basing the CCS on combined annual family income is consistent with other settings for the CCS, such as the activity test, which is based on the activity each parent undertakes, including in two-parent families where the parent with the lower activity level determines the hours of subsidy per fortnight. This is because the Government considers that the cost and responsibility of raising children is shared within the family unit.

Further, the CCS is based on combined annual family income to ensure the subsidy is targeted to assist as many families as possible. Calculating child care fee assistance based on single income, particularly if based on the parent with the lowest income in two-parent families, would represent a significantly higher cost to the taxpayer. This approach would also disproportionately benefit families with one high income earner and provide little extra assistance for those who need it the most, such as low income families or single parents. It would also reduce the incentives for the lower income earner to return to work or increase their workforce participation.

The Government also recognises children from disadvantaged backgrounds benefit most from quality early childhood education and care. This is why families earning $66,958 or less who do not meet or are not exempt from the activity test are entitled to 24 hours of subsidised child care per fortnight at the highest rate of subsidy under the Child Care Safety Net.

Under the CCS, families earning $66,958 or less receive the maximum CCS rate of 85 per cent. As family income increases the rate of subsidy decreases, reaching zero per cent at $351,248. Families with incomes at or above this threshold have no CCS entitlement as the Government considers that high income families are better able to meet their child care costs. This ensures more financial support is targeted to the families who need it most.

I can further assure the petitioner that all aspects of the new child care package have been reviewed and tightened to ensure a sustainable system into the future. The package includes a number of mechanisms to help reduce costs for parents. For example, the hourly rate caps, which are the maximum hourly rate the Government will subsidise for each service type, effectively sets a reference point from which parents can expect prices should not dramatically exceed and from which they can hold providers accountable.

Additionally, as part of simplifying the child care package and ensuring services can operate in a manner that best suits the families who use them and to provide flexible and cost effective child care, the Government has reduced the regulatory requirements currently applying to child care services, including the hours per day and days per week a service must open. This means services have the flexibility to offer, for example, shorter sessions of care for parents who work part time hours. Some services, to their credit, are already offering shorter sessions of care to their families since the package commenced.

Thank you for writing on behalf of the Standing Committee on Petitions, and I trust this information is of assistance to the petitioner.

Yours sincerely

from the Minister for Education, Mr Tehan (Petition No. EN0495)