The cost of raising children: Child care subsidy changes
Written and accurate as at: Dec 09, 2021 Current Stats & Facts
According to recent research published by the Australian Institute of Family Studies*, the total cost of raising a young child can range from $140 per week ($7,280 annually) for unemployed families (receiving social security benefits), and $170 per week ($8,840 annually) for low-paid families (receiving minimum wage).
And, when considering the inclusion of an additional child, the total cost can increase to $280 per week ($14,560 annually) and $340 per week ($17,680 annually), respectively.
The weekly costs factored into these total cost estimates can include food, clothing and footwear, household goods and services, transport, health, personal care, recreation, education, and housing (rent).
For comparison, the research also advised that these latest total cost estimates have risen substantially over the last two decades due to changing community expectations of what children need to live a healthy life.
Importantly, while you may not be unemployed or low-paid, the above figures may still be useful in providing guidance on the minimum estimated total costs involved in raising one or two children.
One particular cost many families can often struggle with is the cost of child care. We recently shared an informative video by the ABC, which explores the impact child care costs are having on some families (eg deciding not to have additional children and delaying the return to work).
Here is an interesting summary of research into the cost of child care compared to the cost of primary school:
“A family household where each parent is on the average full-time wage ($85,000pp, ABS, 2019) will spend more out-of-pocket on child care ($5,949) compared to a family sending their child to an independent school (average $5,782) and significantly more than sending their child to a Catholic (average $1,900) or government school ($336), if they are using child care for a similar amount of hours as a child attending primary school”^.
Somewhat cognisant of the impact of this cost on families, in the 2021-22 Budget, proposed measures were announced regarding child care costs and the Government subsidies available—namely, the Child Care Subsidy.
Importantly, this proposed measure was recently legislated, receiving Royal Assent on 27 August 2021. Below is general information on the incoming changes to the Child Care Subsidy, commencing from 7 March 2022.
Child Care Subsidy
Overview
The Government provides child care fee assistance to families. In broad terms, this assistance aims to enable parents and carers to participate in the workforce by making child care both affordable and accessible.
The main Government program that seeks to achieve this is the Child Care Subsidy, which replaced the Child Care Benefit and Child Care Rebate from 2 July 2018. Of note, as at December 2020, there were around 946,190 families with children attending Child Care Subsidy approved child care services.
Importantly, as it stands, the level of Child Care Subsidy an eligible family may be entitled to (after satisfying certain general requirements), is assessed against several interconnected factors, for example:
- a combined family income;
- an activity test (the activity level of the parents); and,
- an hourly rate cap applied in relation to the child care service type and age of the child.
Please note: An annual subsidisation cap (per child) exists where a household’s combined family income exceeds an income threshold. For the 2021-22 financial year, the cap is $10,655, and the threshold is $190,015 (and less than $354,305). Of note, around 18,000 families reach the cap each year.
For more information on how the level of Child Care Subsidy is calculated, click here.
Changes
- From 10 December 2021, the government will remove the maximum annual limit of Child Care Subsidy payable per child (the annual subsidy cap) that applies to families with an annual adjusted taxable income of over $190,015 (and less than $354,305). Families that have already exceeded the cap as at 10 December 2021 will be reassessed and may receive a back payment.
- Around 250,000 families—those with two or more children under age 6 who are eligible for the Child Care Subsidy—are expected to benefit from an increase in the rate of Child Care Subsidy due to take effect from 7 March 2022 (previously 11 July 2022).
- The Child Care Subsidy rate for eligible second and subsequent children will be the percentage amount worked out under the income test, plus 30 percentage points up to a maximum of 95%. Please note: The Child Care Subsidy rate for the first child aged under six in child care will stay the same.
Moving forward
For most of us, deciding whether or not to have a child will likely be one of the biggest financial decisions we will ever make. It can be challenging, especially financially, but it can also be very rewarding.
Importantly, it’s key to note that you are not alone in these financial challenges—there is support available. For example, if eligible, the Child Care Subsidy can assist with the costs associated with child care—helping with the management of household expenditure and considerations around returning to work after having children.
If you have any queries about this article, please contact us.
*Australian Government, Australian Institute of Family Studies. (2018). New estimates of the costs of children.
^Hurley, P., Noble, K., & Jackson, J. (2020). Australian investment in education: early childhood education and care. Mitchell Institute, Melbourne.