Federal Budget 2021: $1.7b for childcare changes

Australian parents will have to wait a year to get childcare subsidies, which they claim don’t go far enough.

Working families will save up to $124 a week in daycare fees but must wait more than a year to pocket the cash.

The federal government will spend $1.7 billion to boost the top childcare subsidy from 85 per cent to 95 per cent of fees from July next year.

Parents will be able to claim back up to 95 per cent of the childcare fees for the second and subsequent children, up to the age of five, in centre-based childcare, family daycare or outside school hours care.

The $10,560 cap on subsidies for each child will be abolished from July 2022.

The government’s existing cap on childcare subsidies are set to be abolished from July 2022 as part of the government’s 2021-22 federal budget. Picture: iStock

This will benefit families with combined incomes above $189,390 – roughly the average wage for two working parents, who are now forced to pay full fees once they reach the maximum subsidy cap toward the end of each year.

Treasurer Josh Frydenberg said 250,000 families would be better off by an average of $2200 per year, “giving more parents, especially women, the choice to take on extra work’’.

The higher subsidy means a family earning $80,000 a year, with three children in care four days a week, will be $108 a week better off.

A family earning $110,000 a year, with two children in care four days a week, will get 95 per cent of fees back for the second child in 2022, saving $95 per week.

For a family earning $140,000 a year, the subsidy for the second and subsequent child will jump from 62 per cent to 92 per cent, saving $124 per week.

Higher-income families, earning $180,000, will pocket $124 extra per week when the top subsidy for the second child jumps from 50 per cent to 80 per cent of daycare costs.

Poorer families earning a minimum wage of $40,000 will be $41 a week better off for the second or subsequent child.

Subsidies for families with only one child will not change – ranging from 50 per cent for high income earners to 85 per cent for those on low incomes – but all parents will benefit from the axing of the $10,560 cap.

According to Treasurer Josh Frydenberg, 250,000 families would be better off by an average of $2200 each year. Picture: supplied

All children will be guaranteed free or heavily subsidised access to at least 15 hours of preschool each week, in the year before they start school.

The federal government will give the states and territories $1.6 billion over the next four years in a new funding deal for preschool.

But it will force them to meet attendance targets, and ensure children are ready for school, as a condition of funding.

Federal Education Minister Alan Tudge said the extra funding would “give Australian kids the best possible start to their education through better access to preschool and more affordable childcare’’.

The Parenthood executive director Georgie Dent said the higher subsidies were a welcome step that did not go far enough to help families.

“Disappointingly, not one Australian family will receive the relief from childcare costs until next year, and 750,000 families will miss out altogether,’’ she said. 

Dent described the overall budget as “full of spin, but low on systemic reform,” adding, “We want a highly functioning quality early education system that is completely affordable and accessible for all families,” she said.

Mission Australia CEO James Toomey said the childcare changes will help give children “the best possible start in life through more affordable access to quality education and care.

“Affordable early learning also reduces barriers for parents to return to work and is an important contributor toward a more fair and prosperous Australia,” Mr Toomey said.

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Originally published as Federal Budget 2021: $1.7b for childcare changes