BY HEJIRA CONVERY, KINDICARE

JULY 5, 2023

Childcare fees are a big part of the family budget, and although the government is helping most of us by boosting the Child Care Subsidy (CCS) from 10 July, all those out-of-pocket fees still add up, and our other expenses aren’t going away either. 

What can help a little, though, is to understand how the CCS hourly rate cap and activity test work, and then weigh up different childcare scenarios, based on your family’s individual circumstances.  

We’re not promising financial miracles, but if you have a bit of flexibility, and know your childcare options, it is possible to reduce your out-of-pocket costs.  

Firstly, it can pay to send your child to a service that’s open for lots of hours per day.  

This is because the government looks at your service’s hourly rate cap (which is $13.73 for long day care), and the actual hourly fee you’re being charged, then applies your CCS percentage to the smaller figure.  

In parent-friendly terms, this means that if your long day care charges $15 per hour for your kiddo’s care, the government will apply your CCS percentage to the $13.73 hourly rate cap figure, because it’s the lower number.  

Obviously, most services charge a daily fee, not an hourly one, so the government divides your service’s daily fee by the number of hours they’re open, to calculate the hourly fee you’re being charged. 

And this is where things can get tricky/unfair when it comes to the CCS, because if your service is open nine hours a day, the hourly fee will be higher than if your service is open 12 hours a day. 

For example, if your service charges $140 per day, the hourly fee for a 12-hour day works out to be $11.67, versus $15.55 if they’re open nine hours a day.  

The government will apply your CCS percentage to the $11.67 figure in the first case, and the $13.73 figure in the second case, meaning they’ll pay less towards your care if your service is open fewer hours.  

Or, in other words, your gap fee will be bigger, even though the daily rate is still $140.   

For this reason, it can make more financial sense to enrol your child in a service that’s open lots of hours per day. 

This is just one consideration, though, and if you find an amazing place that’s open nine hours a day, you may be more than willing to get a little less government assistance for a lot more quality education and care.  

It’s also important to be aware of how much subsidised care you’re entitled to.  

This is determined by the CCS activity test, and it means that your family will be entitled to 0, 24, 36, 72 or 100 hours of subsidised childcare each fortnight. 

Again, things get tricky when it comes to the whole ‘daily childcare fee versus hours of subsidised care’ situation, because you’ll use your subsidised hours more quickly if your child attends a service that’s open for a lot of hours each day.  

For example, if you qualify for 100 hours of subsidised care per fortnight, you can use this for eight days at a service that’s open 12 hours a day (using 96 of your hours). 

Or, you can use it for two full weeks of childcare at a service that’s open nine hours a day.  

Depending on your individual CCS circumstances, this means you may have to choose between getting more days of subsidised care by choosing a service with shorter hours, or more help with your fees by choosing a service with longer hours.  

Sending your child to care for less days per week can also save you money. 

We know this isn’t always possible, but a mix of formal and informal care can cut childcare costs (for instance, if you’re able to work from home one day a week, or ‘hire’ the grandparents to look after your child on a regular, part-time basis). 

This reduces the days you’re actually paying for childcare, and enrolling your child in formal care for less days each week may have a positive effect on your out-of-pocket expenses.  

For example, at KindiCare, we’ve calculated that a family earning $120,000 a year, with two under-fives in care for 12 hours a day, will spend $123.28 per week for four days of childcare, versus $351.75 per week for five days of childcare. 

Another key way to cut childcare costs is to find amazing childcare at a super cheap price! 

This is not always easy (now, there’s an understatement…), but there are lots of services to choose from, each with their own offering; and our Value for Money Rating tells you whether the price a service is charging is good value for money, compared to other services of the same type in the same area. 

You also need to factor in your own values when weighing up the fees you’re comfortable with, and you might put a high personal price on sparkly facilities, super well-trained educators, or simply being able to secure a childcare place in a high demand area!  

When it comes to cost, one childcare location or service type might make more financial sense than another; and if you have a preschooler, your government may be feeling generous when it comes to kindy. 

For instance, the Queensland government is rolling out 15 hours of free kindy for all families from next year, and Free Kinder is available right now to all three- and four-year-olds in Victoria. 

At the end of the day, a lot of things go into the mix when calculating your CCS and finding childcare that’s affordable for your family.  

And although KindiCare doesn’t know how flexible your employer is, or whether Granny is free to look after your little one every Tuesday, we can help you compare different childcare scenarios to see which ones are best for your budget.  

The KindiCare Childcare Comparison Calculator is a free and easy online tool that shows you how much you’ll save from 10 July, and also estimates your out-of-pocket expenses each week, depending on which childcare you choose and use.  

You can plug in different days, hours and care types to see which will be cheapest each week, and there can be quite a big difference!  

For example, if your household is earning $130,000 per annum, you’re working full-time and have a two-year-old in $140-a-day childcare, you could be paying $84 for three days of 12-hour care, or $164.58 for four days of nine-hour care.  

It’s definitely worth having a play with the calculator to see if there’s a more cost-effective option for you; and whatever you’re paying, it is worth remembering that quality early childhood education and care has priceless benefits for your child, even though it comes at a real cost.