Crystal Wealth Newsroom
Childcare subsidy increase: gamechanger or not?
Proposed changes to the childcare rebate scheme, announced as part of last week’s federal budget, have grabbed headlines as a boost for families with children in pre-school care.
The policy, which is due to come into effect on 1 July 2022, will offer rebates of up to 95% for families that have more than one child under the age of six in daycare.
In Treasurer Josh Frydenberg’s budget speech, he estimated a quarter of a million families would be better off by an average of $2200 per annum thanks to a policy that’s intended to help primary carers go back to work.
Under the current policy, families earning up to $69,390 receive 85% subsidy, and the percentage subsidy decreases incrementally to 20% for those earning between $343,680 and $353,680.
At present, a cap of $10,560 per child exists on subsidies for families that earn between $189,390 and $353,680.
The new policy will see a family’s child care subsidy increase by 30% (capped at 95%) for second and subsequent children in care, and the annual cap of $10,560 is being removed.
However, despite the headline-grabbing nature of the proposal, Lisa Fowler, Crystal Wealth’s Head of Advice and Investment, believes it’s a policy that will struggle to have the desired impact of encouraging people back to work.
“To access the increased subsidy a family needs to have two or more children in childcare at the same time. It’s that requirement that certainly narrows the number of families that could qualify and I don’t think it’s material enough to attract and support many more primary carers back into the workforce,” says Lisa.
“In reality, to reform childcare and the workforce participation of women, we need a much more comprehensive review of the system, rather than introducing something that has limited effect for a small number of families.”
That’s a sentiment shared by The Tax Institute, which commented in a press release on the topic:
“Arguably, the proposed measures are more complex and limited than they need to be… one must ask whether these measures will achieve the objective of making childcare more affordable and boosting workforce participation.
“Given the limitations [of the scheme only affecting families with two or more children under the age of six] it is difficult to understand how the proposed measures will assist as many families as the Government had estimated. Further, it is difficult to see how these measures will address the underlying systemic issues in relation to child care costs and disincentives to return to paid work or accept additional work.”
While a small proportion of families will be better off, this headline grabber is just that – with little real change underpinning it.