Childcare cash backflip to boost family budgets every fortnight
A BLANKET tax built into the federal government’s new childcare system has been halved, giving families more money in their pockets each fortnight.
The government succumbed to mounting pressure and backflipped on a plan to withhold 10 per cent of childcare subsidies owed to families until the end of the financial year in order to prevent bill shock.
Under the current system introduced by Labor, the government withholds up to 15 per cent of some payments, including the Child Care Rebate, as a buffer to “offset potential debts”. But lower income families who receive the means-tested Child Care Benefit have always received the full amount upfront.
Modelling provided to The Sunday Telegraph revealed families will now be hundreds of dollars better off each year following the government’s snap decision to reduce its blanket withholding rate from 10 per cent to 5 per cent.
A family on a combined income of $150,000 with two children in child care three days a week will have $900 a year held by the government compared with $2100 under the current system. The government has updated its online calculator to reflect the change.
Education Minister Simon Birmingham said families would be able to request a lower withholding rate in the system from July and “they’ll get every cent they’re entitled to”.
Labor said the government’s backflip was “an admission the unfair tax was going to hit the hip pockets of families”.