New Child Care Subsidy far from child’s play

10th April 2018

Media release

On July 2, the Child Care Benefit and Rebate will be replaced by a single payment, the Child Care Subsidy (CCS). Hundreds of thousands of parents will see their child care support payments change, but not all will be better off.

The CCS will be subject to an income test and an activity test. Payment rates will be a percentage of the hourly rate of care (up to a maximum hourly rate) and will range from 0% to 85% of the hourly rate of care, depending on the carers’ or parents’ adjusted taxable income.

wealthdigital’s Technical Manager, Rob Lavery, believes parents will need help to understand the new rules, and that financial advisers are well placed to lend a hand.

“The new rules contain a number of traps that carers and parents will not have seen before,” said Lavery. “A prime example is the $10,000 Annual Cap. Unlike current Child Care Rebate arrangements, this cap is income tested. Once the family’s Adjusted Taxable Income breaches the set threshold, currently $186,958, their maximum CCS for the year will be $10,000.”

“For families where both parents work, this threshold could be a significant factor in determining how many days a week the primary carer returns to work. If working that extra day a week will see the family’s income rise over the threshold, it might cost the family thousands of dollars a year in lost CCS.”

While Lavery sees issues for double income families, he also cites the new activity test as a potential issue. “Under the current rules, a parent with no work or study related activity can still qualify for 24 hours worth of Child Care Benefit a week. They may also qualify for the Child Care Rebate with as little as one hour’s worth of activity.”

“Under the new CCS rules, both parents are activity tested and the lower result is the one used. If the lower result is less than 8 hours of activity a fortnight, the family is not entitled to any Child Care Subsidy.”

Hourly rate caps are another factor to consider. “The new rules will place limits on the hourly rates on which the CCS will be calculated. In many circumstances these caps will be lower than the actual rates charged by child care providers. In areas with higher demand for child care places, the difference between the actual rate and the applicable cap may be significant.”

“Those with higher incomes will also see a drop in their payments,” Lavery added. “The current Child Care Rebate is not income tested whereas the new Child Care Subsidy will be. Families with incomes at the higher end of the scale, particularly those over $341,248, may lose most, or all, of their child care support.”

Lavery concluded, “the changes are complex and will not be easy for parents and carers to wrap their minds around. A trusted professional, such as a financial adviser, can provide invaluable help to parents trying to balance their financial needs with the desire to spend as much time with their children as possible.”

-oOo-

For more information please contact:

wealthdigital

Rob Lavery – Technical Manager

Ph: 0458 347 497

E: rob@knowitgroup.com.au

 

knowITdigital

Wayne Wilson – CEO

Ph: 0434 848 100

E: wayne@knowitgroup.com.au

 

About wealthdigital

wealthdigital provides technical library resources, goals-based strategy solutions, advice implementation tools, and business development services to over 4500 financial planners and practice principals across Australia. It is knowITdigital’s online business.

 

About knowITdigital

knowITdigital is a software product and services company that specialises in online tools and learning in the financial services industry. knowITdigital is a subsidiary of the holding company knowIT group Pty Ltd

38/23 Narabang Way
Belrose NSW 2085
T: 1300 000 499