Child care reforms – what they mean for you?

In March, the Turnbull government’s child care reforms were passed through the Senate. Known as the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill, the new law changes the way families receive subsidies for child care.

In this article, we outline some of the proposed changes and explain what they will mean for all types of families.

If you would like to know more about the changes or are wondering if they will affect your financial plans, make sure you give us a call today.

Child Care Subsidy

The existing Child Care Benefit and Child Care Rebate systems will be replaced by a single new payment known as the Child Care Subsidy.

This single means-tested subsidy will pay a rate of 85% for families earning up to $65,710 and it reduces to 20% for families earning between $250,000 and $340,000.

Hourly rate cap

A new hourly rate cap will be applied to the subsidies in order to control child care price increases.

Activity testing

A new activity test will give parents access to 36, 72 or 100 hours of subsidised care per child per fortnight. Parents who work between 8 and 16 hours per fortnight (combined) will be given access to up to 36 hours of subsidised care per child, per fortnight. Those working between 17 and 48 hours (combined) will receive up to 72 hours of subsidised care, while those working more than 49 hours will be given access to up to 100 hours of subsidised child care.
Parents are required to work, study or volunteer for at least eight hours a fortnight in order to receive the subsidy.

Old rebate gone

The $7,500 rebate cap will be abolished so that families on incomes of $185,710 or less are not limited by a cap on the amount of child care they can access, and the cap will be increased to $10,000 for families earning more than $185,710.

Child Care Safety Net

A new $1 billion Child Care Safety Net will help families earning less than $65,710 and who do not meet the activity test. Those families will be eligible for up to 24 hours of subsided care each fortnight.

So what will the new reforms mean for you, your family or your friends?

In a nutshell, families earning $65,710 or less, will have 85% of their child care fees covered by the government.

The subsidy gradually tapers down to 50% for families earning $170,710.

For those earning between $170,710 - $250,000, they will have 50% of their child care fees covered by the government.

For those earning between $250,000 - $340,000, the subsidy will taper down to about 20%.

And anyone on more than $350,000 will not get any subsidies.

The new child care reforms are set to come into effect in July 2018, so now is the time to do your homework to see how they will affect you.

The way that Centrelink assesses reportable fringe benefits when calculating a person's adjusted taxable income will also be changed from 1st July 2017. Previously, just 51% of the total reportable fringe benefits were included. However, from 1st January 100% of the total value is included. This change also affects other forms of Centrelink family assistance such as Family Tax benefits (Parts A and B) and parental leave pay.

Note: there are some exemptions to this calculation for Public hospital and ambulance employees and some charity employees, but it didn't seem worth mentioning above.

Regardless whether you’re going to be better or worse off under these changes, understanding your cashflow will give you greater control of your finances so you can make the right choice for your situation.

We have the tools to help you track and manage your cashflow. Our new cashflow management software MoneyTrack can help you stay on budget and on task with your financial goals.

We can show you how the app works and how you get the most out of it, so make sure you give us a call today.

Find out about our cashflow coaching tool

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