New childcare subsidy a slug for some parents

Professional women who want to go back to fulltime work after having children will be hit hard by the new childcare subsidy.

Barry and Jen O’Malley at home in Randwick with daughter Erica: ‘There should be some kind of benefit applying to all families regardless of income’. Picture: Britta Campion

Professional women who want to go back to fulltime work after having children will be hit hard by the federal government’s new childcare subsidy, with many already scaling back hours because they simply cannot afford the cost of care in big cities.

Jen O’Malley, a 35-year-old ­accountant from Randwick in Sydney’s eastern suburbs, is considering dropping from five days a week to three because the new Child Care Subsidy penalises families like hers for working longer.

“It will mean that we are no longer eligible for any form of childcare rebate and our out-of-pocket childcare expenses will be nearly $800 per week,” Ms O’Malley said.

“The effect of the new subsidy on our family essentially works out as an equivalent $15,000 reduction in salary relative to last financial year.”

Barry O’Malley, 36, works in banking and the couple’s 21-month-old daughter, Erica, attends long daycare for two days a week in the city and the other three days in Bondi Junction.

Under the new subsidies, families with household incomes of $351,248 or more receive no subsidy and for those with household earnings of $187,000 or more the subsidy is capped at $10,000 per child, per year.

There are, however, hourly caps on care and the government will fund only a maximum of 50 hours per week, so if families need care for more than that they must pay the difference.

The NSW branch of the Australian Childcare Alliance says parents who work between 16 and 24 hours per week, under the new activity test, could in fact receive less subsidised childcare support under the new system than under the old rebate. “Although many taxpayers may sympathise with the commonwealth that families who earn too much can afford childcare without taxpayer assistance, the new Child Care Subsidy can act as a disincentive for many families who live in high-cost ­cities like Sydney,” ACA NSW executive officer Chiang Lim said.

“The new subsidy, ironically, can be a somewhat blunt instrument that discourages some parents who live in expensive cities like Sydney to work and earn more, choosing perhaps instead to work less in order to augment their income with the maximum possible government assistance.

“This is putting at risk full workplace participation and not leveraging all available talent and experience.”

The O’Malleys, at least, have postponed plans to buy a home and have reconsidered the timing of having a second child.

“Two children in fulltime childcare with no rebate would make things financially difficult,” Ms O’Malley said.

“We appreciate the government’s efforts to make childcare more affordable to a greater number of people through the recent policy changes. That said, we think there should be some kind of benefit applying to all families regardless of income earned.”