Families earning over $180,000 a year could have childcare rebate reduced

SCRAPPING the $7500 cap on childcare rebates that condemns parents to huge out-of-pocket costs is being seriously considered in the May budget as a trade-off to reducing the rebate for the wealthy.

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SCRAPPING the $7500 cap on childcare rebates that condemns parents to huge out-of-pocket costs is being seriously considered in the May budget as a trade-off to reducing the rebate for the wealthy.

The rebate cap has emerged as a nightmare for parents ­because, as soon as families reach the cap, the 50 per cent childcare rebate is slashed to zero, doubling care costs.

Social Services Minister Scott Morrison has revealed that wealthier families are telling the government that scrapping the cap is more important to them than keeping the ­rebate at 50 per cent.

Mr Morrison has also nominated a combined family ­income of $180,000 as a reasonable benchmark for wealthier families.

In an exclusive interview with The Sunday Telegraph, Mr Morrison has revealed that wealthier parents have told the government they are prepared to consider trade-offs that would taper the 50 per cent ­rebate down at certain income levels, if the childcare rebate cap is scrapped.

“If someone was able to have no cap and therefore work more hours, there is a perception that having a lower level of subsidy would be a reasonable trade-off,’’ he said.

Social Services Scott Morrison is looking at changing the childcare cap.

“Where we’ve had a lot of feedback is on the cap itself ­because people arrange their hours to suit coming in under the cap, and the cap is coming back to us as being quite an ­inhibitor when it comes to workforce participation.

“For higher income earners … people earning over $180,000 in family ­income, what is more important to those families, the feedback we have, is the ­inflexibility of the cap rather than the level of subsidy.”

However, Mr Morrison stressed he is yet to announce any formal decision to scrap the cap or decrease the rebate for high-income earners.

“That doesn’t mean that’s the case on lower incomes. On middle to lower incomes the ­financial equation was the most pressing,” he said.

“I am just saying the feedback from families is you need greater flexibility rather than higher subsidies.’’

The Sunday Telegraph has previously revealed that up to 150,000 families risk hitting the cap by 2017 as childcare fees rise and more families hit the cap each year.

The cap currently operates as a de facto means test for the childcare ­rebate since high-income families with two incomes living in big cities and paying over $100 a day are most likely to hit the childcare rebate cap.

Scrapping the cap would help all parents paying daily childcare fees of over $100 a day in capital cities. Low- and middle-income families would be better off or face no change under the proposed reforms

Scrapping the rebate cap was also a key recommendation of the Productivity Commission into childcare.