From 1 July 2022, Parents with 2 or more children at day care will receive major saving to child care 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 now incentivising families with multiple children to utilise child care 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 1 July 2022. The subsidy remains unchanged for the first child but each subsequent child receives a significant subsidy.
The changes are as follows:
|Family Adjusted Taxable Income||Current subsidy rate for an additional child under 5||Future rate for an additional child under 5|
|$0 – $69,390||85%||95%|
|$69,390 – $129,390||85% minus 1% every $3,000 of income > $129,390||95%|
|$129,390 – $174,390||65% minus 1% every $3,000 of income > $129,390||95% minus 1% every $3,000 of income > $129,390|
|$174,390 – $253,680||50%||80%|
|$253,680 – $343,680||80% minus 1% every $3,000 of income > $253,680||80% minus 1% every $3,000 of income > $253,680|
|$343,680 – $353,680||20%||50%|
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 July 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 Income||Current Subsidy for Second Child per week||Current Cost for Second Child per week||Future Subsidy for Second Child per week||Future Cost for Second Child per week||Total better off per week|
|$40,000||85%||$ 78||95%||$ 26||$ 52|
|$80,000||82%||$ 94||95%||$ 26||$ 68|
|$110,000||72%||$ 146||95%||$ 26||$ 120|
|$140,000||62%||$ 198||92%||$ 42||$ 156|
|$180,000||50%||$ 260||80%||$ 104||$ 156|
To find out exactly what these changes will mean to your and your family please get in touch and speak to one of our advisers.
Read out article on other key Federal Budget 2021 changes here.
You can also find out more about the details of childcare subsidy changes at the official Australian Taxation Office page.
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