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INCREASE TO CHILDCARE SUBSIDY FOR MULTI-CHILD FAMILIES

Article By Adam Camac | | Financial Planning

From 7 March 2022, Parents with 2 or more children at day care will receive major saving to childcare costs.

Returning to work after having children can be an important step in your financial plan, however the existing setup of the governments Child Care Subsidy (CCS) is complex and often remains expensive, heavily impacting the decision as to how a parent returns to work.

The government is now incentivising families with multiple children to utilise childcare by making it affordable to encourage individuals to be able to return to work (either full time or part time) by raising the childcare subsidy for families. The incentives apply where there are multiple children in childcare under the age of 5 From 7 March 2022. The subsidy remains unchanged for the first child, but each subsequent child receives a significant subsidy. Eligible younger children will receive a 30% higher subsidy, up to a maximum 95%.

The changes are as follows:

Family Adjusted Taxable IncomeCurrent subsidy rate for an additional child under 5Future rate for an additional child under 5
$0 – $69,39085%95%
$69,390 – $129,39085% minus 1% every $3,000 of income > $129,39095%
$129,390 – $174,39065% minus 1% every $3,000 of income > $129,39095% minus 1% every $3,000 of income > $129,390
$174,390 – $253,68050%80%
$253,680 – $343,68080% minus 1% every $3,000 of income > $253,68080% minus 1% every $3,000 of income > $253,680
$343,680 – $353,68020%50%
$343,680 +0%0%

Further to increasing the subsidy, the government is also removing the $10,560 cap on the subsidy for families with a combined income greater than $189,390. Currently the subsidy cap will be reached before the 12 months is up if both parents were working full time throughout the entire year, making it potentially more beneficial to not return to the workforce full time. Once the cap is removed in March of 2022 the subsidy rate will continue for the full financial year and you are not disincentivised for continuing to work.

These changes can make a substantial difference for young families, as you can see in the following table. This table shows savings on a second child based on the average day-care rate of $10.40 per hour for 50 hours per week; 10 hours per day 5 days a week.

Savings on a second child:

Family IncomeCurrent Subsidy for Second Child per weekCurrent Cost for Second Child per weekFuture Subsidy for Second Child per weekFuture Cost for Second Child per weekTotal better off per week
$40,00085% $        7895% $        26 $        52
$80,00082% $        9495% $        26 $        68
$110,00072% $      14695% $        26 $      120
$140,00062% $      19892% $        42 $      156
$180,00050% $      26080% $      104 $      156

Additionally, combined families will now receive more support with a higher rate from July 2022. Services Australia will backpay the higher subsidy amount to affected families from March until July. This will automatically come into effect.

To find out exactly what these changes will mean to you and your family please get in touch and speak to one of our advisers.

You can also find out more about the details of childcare subsidy changes at the official Australian Taxation Office page.

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