How is the Child Care Subsidy Calculated?
Quick summary
The Child Care Subsidy (CCS) is calculated using three main factors: your combined family income, your fortnightly hours of activity like work or study, and the type of childcare you use. Your income determines the subsidy percentage you get, while your activity level sets the maximum hours of care you can claim. The government then applies this to an hourly rate cap.
Key takeaways
- Calculate your subsidy based on income, activity level, and service type.
- Update your family income estimate with Services Australia to avoid a debt.
- Your activity level determines your maximum hours of subsidised care per fortnight.
- The government subsidises up to a set hourly rate cap, not the full fee.
- Apply for CCS and manage your details online through your MyGov account.
Understanding Child Care Subsidy (CCS)
Figuring out childcare costs can feel complicated. A big part of this puzzle for many families is the Child Care Subsidy, or CCS. It’s the main way the Australian Government helps you with the cost of child care. Many parents ask us how it all works.
We’re here to help. This guide will break down how the subsidy is calculated in simple terms. While we can explain the rules, please remember this is general information. For advice specific to your family, it’s always best to speak directly with Services Australia.
What is the Child Care Subsidy?
The Child Care Subsidy is a single payment designed to make early learning and child care more affordable. It isn’t paid to you directly. Instead, it’s paid straight to your approved childcare provider, like Meraki Early Learning Centres.
This payment reduces the amount of fees you have to pay out-of-pocket. Every family’s subsidy is different because it’s based on your personal circumstances. The goal is to provide more support to families who need it most, including lower-income families, and to support parents who are working or studying.
The subsidy applies to approved care types, which includes centre-based day care like our services in childcare in Mooroolbark and Bayswater. It’s a system designed to help your child get a great start in life while you can participate in work, training, or study.
The 3 Factors That Determine Your CCS
Services Australia uses three main factors to work out how much Child Care Subsidy you are entitled to. Understanding these three pieces is the key to understanding your subsidy.
The three factors are:
- Your combined family income: How much your family earns in a financial year.
- Your activity level: The hours of work, study, or other recognised activities you and your partner do.
- Your childcare service type: The type of care you use (e.g., centre-based day care) and its hourly rate.
Let’s look at each of these factors one by one. They all work together to determine your final subsidy percentage and the number of hours it can be applied to.
Factor 1: Your Combined Family Income
Your family’s income is the first thing Services Australia looks at to determine your CCS percentage. The rule is simple: the lower your combined annual income, the higher your subsidy percentage will be.
When you apply for CCS, you will need to provide an estimate of your family's total income for the full financial year. Services Australia uses this estimate to calculate your subsidy rate. The government sets different income thresholds, and your rate depends on which bracket you fall into. For example, families earning up to a certain amount receive the highest percentage of subsidy.
It is very important to keep this income estimate updated. If your circumstances change—for example, you get a pay rise or change jobs—you should update your details with Centrelink through your MyGov account. This helps make sure you are paid the right amount and can help you avoid an overpayment that you have to pay back at tax time.
Factor 2: Your Fortnightly Activity Level
The second factor is the amount of recognised activity you and your partner do each fortnight. This is often called the 'activity test'. The more hours of activity you do, the more hours of subsidised care you can access, up to a maximum of 100 hours per child, per fortnight.
Recognised activities include a wide range of things, such as:
- Paid work, including being self-employed.
- Doing unpaid work in a family business.
- Training or studying for a qualification.
- Actively looking for work.
- Volunteering.
- Paid or unpaid leave, including parental leave.
For two-parent families, Services Australia uses the parent with the lower activity level to determine the subsidised hours. For example, if one parent works 30 hours a fortnight and the other works 50, your subsidised hours would be based on the 30-hour activity level.
Even a small amount of activity can make you eligible for subsidised hours, which is helpful for families wanting to access our wonderful three-year-old kinder programme.
Factor 3: Your Centre's Fees and the Hourly Rate Cap
The final factor is the type of service you use and their fees. The government sets an hourly rate cap based on the type of care. For services like ours, this is the 'centre-based day care' cap.
The CCS is calculated based on your centre's hourly fee or the government's hourly rate cap, whichever is lower. This is a key point to understand. If your centre's hourly fee is more than the cap, you will need to pay the difference. For example, if the centre's fee is $15 per hour and the cap is $14, your subsidy will only be calculated on the $14. You would pay your usual gap fee on the $14, plus the full $1 difference.
At Meraki, our daily fee is all-inclusive. It covers everything from nutritious meals prepared by our on-site chef to nappies and educational programmes. When you're comparing centres, it's important to look at what's included in the fee to understand the total value. This transparent approach helps families at our Bayswater childcare centre and Mooroolbark location to budget more effectively.
Putting It All Together: A Simple Example
Let's imagine a family to see how these three factors work together. The Smiths have a combined family income of $160,000 per year. Both parents work full-time, easily meeting the activity test for 100 hours of subsidised care per fortnight.
First, Services Australia looks at their income. Based on their income bracket, they might be eligible for a 65% subsidy. This is their CCS percentage.
Next, their activity level gives them the maximum 100 hours of care per fortnight. Then, we look at the hourly rate cap. Let’s say the cap for centre-based care is $14.00 per hour.
The government will subsidise 65% of the hourly rate cap. So, the subsidy per hour would be 65% of $14.00, which is $9.10 per hour. The family’s out-of-pocket, or 'gap', fee would be the remaining $4.90 per hour, plus any amount the centre charges above the hourly cap. This amount is calculated for each session of care their child attends.
Remember, this is just a simplified example. You should use the official Payment and Service Finder on the Services Australia website to get an estimate for your own family. If you have any questions about our fees or enrolment, please feel free to contact our friendly team.
Frequently asked questions
What counts as a 'recognised activity' for the activity test?
A recognised activity includes paid work, being self-employed, unpaid work in a family business, studying, volunteering, or actively looking for work. Even a few hours a fortnight can make you eligible for subsidised hours. If you're in a two-parent family, Services Australia uses the activity level of the parent doing the fewest hours to determine your entitlement.
What happens if my income or activity hours change during the year?
You must update your details with Services Australia as soon as your circumstances change. You can do this through your MyGov account linked to Centrelink. Keeping your income estimate and activity hours current helps ensure you are paid the correct subsidy amount. This can prevent you from being overpaid and having to pay money back at the end of the financial year.
Why is some of my fee not covered by CCS?
Your out-of-pocket fee is the amount not covered by the Child Care Subsidy. This happens for two reasons. First, the CCS only covers a percentage of your fee (e.g., 50% or 85%). Second, the subsidy is calculated on your centre's fee or the government's hourly rate cap, whichever is lower. If your centre's hourly fee is higher than the government's cap, you must pay the full difference.
Do I still get CCS if my child is absent from care?
Yes, you are entitled to receive CCS for a certain number of absence days per child, each financial year, without needing to provide evidence. Currently, this is 42 days. These can be used for any reason, including holidays or illness. For specific circumstances like illness with a medical certificate, you may be able to access additional absence days. Always check with Services Australia for the most current rules.
What is the higher subsidy for families with multiple children?
Families with more than one child aged 5 or under in care may get a higher subsidy for one or more of their children. The higher rate is for the second child and any younger children. The standard CCS rate applies to the eldest child. From July 2023, this higher rate is calculated based on your family's income and is applied automatically by Services Australia.
Where can I get an exact estimate of my CCS?
The best place for an accurate estimate is the Services Australia website. You can use their online 'Payment and Service Finder' tool. This will ask you questions about your family income, activity levels, and the type of care you plan to use. It will provide a detailed estimate of your potential subsidy percentage and hours. This is more reliable than third-party calculators.
Book a tour of Meraki ELC
Want to see how we'd answer this for your family? Book a tour at our Mooroolbark or Bayswater centre — or use the contact form and we'll come back to you within one business day.