Some families win, some lose

The federal government’s new child care subsidy has replaced a $7500 rebate paid out over the financial year with a means-tested benefit that is only paid out if you work, study or volunteer.

Eligibility is based on the parent who works the least, so if one parent works and the other stays at home you don’t qualify for the subsidy.

Some lower and middle income families will be better off under the new arrangements but others will be worse off.

If you earn up to $66,958 you receive 85% of what you pay for each child. Then between $66,958 and $171,958 your subsidy goes down by 1% for every extra $3000 of income.

From $171,958 to $251,248 the rate is 50%. Families earning more than $186,959 in household income will have payments capped at $10,190 and those earning more than $351,248 will get nothing.

The subsidy doesn’t kick in automatically; you have to let Centrelink know about your situation so your entitlement can be calculated according to your combined family income, hours worked and the type of child care that you are using.

The money is no longer paid into your bank account, with payments going directly to your provider. The government withholds 5% of the fees, to be returned at tax time, just in case families miscalculate their income.