Thousands of families face child care financial cliff

Media Release
  • Minister for Education and Training

New data shows that thousands of families have hit the child care assistance cap just weeks into the new year, forcing up their out of pocket child care costs.

Minister for Education and Training Simon Birmingham said just two weeks into the new year, more than 3,600 families had hit the $7,500 rebate cap for access to early childhood education and care services.

Minister Birmingham said it was vital for Australian families that Labor and the crossbench support the measures needed to pay for the Turnbull Government’s plan to take a passive welfare payment and instead empower families to choose a greater level of workforce participation without being constrained by child care costs.

“We won’t give up on delivering more support for hardworking families to pay their childcare bills and to provide more support to parents who don’t currently receive Paid Parental Leave but the reality remains that in times of budget deficits any additional expenditure must be paid for.”

“Thousands of families are starting the new year having already run out of assistance for meeting the cost of early childhood education and care and by the end of June we estimate around 94,000 families will hit the rebate cap,” Minister Birmingham said.

“Families have told me time and time again that the cliff they face in the middle of the financial year cripples household budgets, means one parent goes to work just to pay childcare bills, results in fewer hours worked or children being abruptly withdrawn from quality early learning opportunities.

“The reforms the Turnbull Government introduced to Parliament last week are designed to stop families falling off that financial cliff.

“Our fully funded reforms will give relief to around 129,000 families by abolishing the $7,500 rebate cap for the vast majority of families and increasing it to $10,000 for higher income families earning $185,000 or more each year.

“Many thousands of other families avoid hitting the current cap by working fewer hours or having one parent not return to work at all.

“We’ll give families relief from the out-of-pocket child care cost pressures they face, end the stress of reaching a funding cliff mid-year and empower parents to make decisions about when or how much to work that best suit their family circumstances.

“Unless Labor and the minor parties support the early childhood education and care reforms the Turnbull Government introduced to Parliament last week, the number of families set to hit the rebate cap will rise to around 129,000 each year.

“The situation will only get worse. More and more families will be cut off from support for early childhood education and care.”

 

2015-16

2016-17

2017-18

2018-19

Actual

Estimate

Estimate

Estimate

Number of families reaching the CCR annual limit

76 000

94 000

112 000

129 000

Source: Department Education and Training Administrative Data

 
 
Minister Birmingham said the new data showed more than one in 10 Australian families using early childhood education and care would lose access to rebates part-way through the year unless Parliament passed the Turnbull Government’s reforms.

“We want to make the early childhood education and care system more affordable, more accessible and flexible for families,” Minister Birmingham said.

“In addition to ending the financial cliff many families face, we are better targeting child care support to the hardest working, lowest income families.  Even when changes to Family Tax Benefit are taken into account hardworking families will often be better off to the tune of thousands of dollars a year.

“For example, a single parent earning $50,000 with two children in care for three days a week will benefit in net terms by around $2,500 a year, while a couple earning $80,000 with two children in care for three days a week will benefit in net terms by nearly $3,000 a year.

“Our changes to the rebate cap and rates of subsidy are complemented by a range of measures in our reforms that will help families and children. We’ll put downward pressure on incessant fee increases with an hourly fee cap, we’ll slash red tape so services can be more flexible in the hours they offer, and we’ll deliver stronger compliance powers to ensure taxpayer funds aren’t abused.

“I call on Labor, who have offered no alternative to address these problems, and my crossbench colleagues to work with us to pass these reforms and fix a broken system.”          

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