Many Australian parents make use of the excellent child care facilities in the country. This comes at a cost, but thankfully the federal government subsidises child care. 

Knowing how to calculate child care subsidy rates for your family is an important part of creating your overall household budget. Factors such as your income, the number of children enrolled, the type of day care you use and more can all affect how much your rate is subsidised and what you end up paying out of pocket.  

What are child care subsidy rates? 

To help parents with the cost of child care, the government introduced a subsidy scheme where they contribute part of the costs. This allows families of all backgrounds to access the same level of care for their children, giving the next generation a more even playing field. 

Since 12 July 2021, subsidy rates of up to 85% were made available. How much you’re entitled to depends on a few factors, the most important being the combined income of your household.

Parents discussing how to calculate child care subsidy rates

How your income impacts child care subsidy rates 

The idea behind the child care subsidy is that it helps parents of all income levels. To ensure this is true, households that earn more money get less of a subsidy and households with lower incomes get more of a helping hand. 

Other factors such as annual caps and hourly rate caps also have an impact on how much your child care subsidy rates are.  

Combined annual income 

The combined annual income of your household dictates how much of a discount you get on your child care. Rather than the centre missing out on income, this is made up instead by the government who pays the day care centre part of your fees. 

The rates and income thresholds chance on a yearly basis, but for 2021-22, there are six bands as follows. 

  • Households earning $354,305 or more get no help with child care fees. 
  • Households earning $344,305 to $354,305 get a 20% subsidy off their fees (meaning they pay 80%). 
  • Households earning $254,305 to $344,305 get a 20-50% subsidy on a sliding scale. 
  • Households earning $175,015 to $254,305 get a 50% discount. 
  • Households earning between $70,015 and $175,015 get 50-85% on a sliding scale. 
  • Households earning below $70,015 get 85% of their child care fees paid by the government. 

The 85% subsidy is the highest amount available for one-child families, but those with more than one child in day care may be eligible for larger subsidies for some of your children. 

Annual cap 

Not all families are eligible for unlimited subsidies through the year – but only for a short while longer. 

For the remainder of the 2021-22 tax year, there is an annual cap of subsidy payments for some families. 

For households that earn between $190,015 and $354,305 are entitled to a maximum of $10,655 in subsidy payments. Families earning less than $195,015 are not restricted by any cap. 

From 2022 onwards, the government has indicated that they will be removing annual caps for all families, regardless of how much they earn. 

Hourly rate cap 

The government has set a rate cap for what they are willing to subsidise. Although some families may be technically able to get an 85% discount on fees, this will be reduced in instances when a child care facility is deemed to be charging over the standard rate. 

Likewise, if a centre is charging less than the government’s estimates, you may be entitled to a better pro rata payment. 

For the 2021-22 year, the hourly cap set by the government is:

  • $11.40 for family day care
  • $12.31 for centre based day care and outside school hours care
  • $33.47 for in home care (per family)
Father calculating and researching child care subsidy rates

How to calculate rates 

Your child care subsidy rates can be calculated can be split up into three steps:

  1. Activity Test
  2. Family information and financial status
  3. Children and child care information

Once you collect all this information, you’ll be able to work out what you’re entitled to and how much you’ll have to pay yourself. 

Step 1 – Activity Test 

Every family has the potential to get subsidies for every child for up to 100 hours of care per fortnight. However, this is limited depending on how much ‘activity’ the parent or parents undertake. 

Unless someone has an exemption, both parents in a two-parent household and single parents must undertake an activity for a stipulated time. 

To get the full 100 hours of subsidised childcare, you must do more than 48 hours of activity in the fortnight. 

If you do 16 to 48 hours, you get 72 hours of child care subsidised in a fortnight. 

For those who do up to 16 hours, 36 hours of child care are subsidised. 

There are a number of recognised activities that count towards this tally, including work, study, internships and volunteering. 

Step 2 – Family Information & Financial Status 

Each family has to give details of their family and what their expected income will be for the following year. 

This will be used for your subsidies throughout the year, however if you over- or under-estimate your finances, this may be adjusted at the end of the year. If you earn more than you estimated, you may have to repay some of the subsidies. 

Step 3 – Children & Child Care Information  

Families with more than one child also have more than one bill, but from 7 March 2022, families with more than one child in day care will receive higher subsidies for multiple children. 

The oldest child will be given the standard subsidy rate and then additional children can receive up to 30% higher subsidies (up to a maximum of 95%).  

This offer is available for families who earn less than $354,305. 

Calculating how much you have to pay when you only have one child is difficult enough, but when you have more than one, perhaps attending day care for a different number of days, it can get even trickier. Thankfully there are reliable online calculators to help you estimate the child care subsidy rates for your family.