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Rebates reducing cost of childcare

FAMILIES are spending less on childcare as a percentage of their household budget than they were almost a decade ago because the increase in government assistance has outstripped price rises, modelling shows.

The figures bolster the case for the federal government's expenditure on childcare assistance payments, which will reach a record high of $22.3 billion over the next four years.

''Helping families is not only fair but makes good economic sense, particularly for those on low incomes,'' the Treasurer, Wayne Swan, said.

The analysis, by the Department of Employment, Education and Workplace Relations, found women on low to average incomes were more likely to return to work if given financial assistance with the cost of childcare.

High income women were less likely to consider government assistance as a factor when deciding when to return to work after having children because childcare costs did not form as great a part of the household budget.

Mr Swan said the tripling of the tax-free threshold had also been of particular benefit to ''mums picking up some part-time work''.

''These are the super mums, the mums who have the responsibilities of raising children and going to work and earning an income.''

The figures come despite increased attention on the rising annual cost of childcare which, in some states, is being blamed on the federal government's attempt to improve the standard and quality of care.

The department's modelling shows a family on a combined income of about $100,000 spent less on out-of-pocket childcare costs last year than in 2004.

Last year a two-parent family with one child in full-time childcare spent an average of 7.5 per cent of its disposable income on care costs. In 2004 it was 13.4 per cent.

Despite yearly increases in the cost of childcare a family with a combined income of $135,000 spent 8.3 per cent of its income on childcare last year, compared to 10 per cent in 2004.

The difference is due to a boost in the childcare rebate from 30 per cent to 50 per cent of out-of-pocket costs, which was introduced by the Labor government when it came to office in 2007.

The government also gave people the opportunity to receive the rebate fortnightly or quarterly instead of as a lump sum at the end of the financial year.

The department's economists concluded that the earlier version of the rebate was not factored into families' budgets because ''there was a considerable lag between the incurring of childcare expenses and the receipt of any rebate''.

Therefore it had not acted as an effective incentive to encouraging women back to work after having children, the paper concluded.

The government's multibillion-dollar expenditure is paid to families through two payments - the means-tested childcare benefit and the non-means tested rebate, which is capped at $7500 per child per year.

It is an investment the government sees as vital to getting as many women with children back into the workforce.

Australia has one of the highest gaps between workforce participation of women with children compared with women without children in the developed world.

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59 comments

  • After just having our first and put her in day care, you sure do notice about $23K pa ($115 per day) missing from your account even with a good combined income.

    The difference in price between suburbs is massive even for the same franchise. Still, very happy with the level of care my girl gets and its sad to hear how little income childcare works are on.

    I have no idea what the answer is but there are still massive ques for childcare places on the Northern Beaches.

    Commenter
    NuBe
    Location
    Sydney
    Date and time
    November 05, 2012, 9:14AM
    • The answer is for all people on welfare who stay at home should not get any child care subsidy. Or at least limit it to one day a week. If you have kids and don't work, then for crying out loud look after them instead of further burdening the tax payers.

      Commenter
      Colin
      Date and time
      November 05, 2012, 10:16AM
    • Colin, the CCR comes with a work study test condition so if you just sit at home like a Mosman mum tends to do then a CCR is not coming your way.

      Commenter
      Alan
      Location
      Sydney
      Date and time
      November 05, 2012, 10:28AM
    • Why then do so many 'Mt Druitt' unemployed mums use childcare, I was of the belief that they receive a large subsidy. Maybe you have to be on a disability pension I don't know. But I know holiday programs at YMCA and PCYC are subsidised purely on the basis of receiving Family Tax Beneift A or B. Meaning unemployed (stay at home) people pay around $10 a day for care whilst other's who are not receiving Family tax Benefit and both work pay $45 a day. I assumed regular childcare worked the same. I may be wrong.

      Commenter
      Colin
      Date and time
      November 05, 2012, 11:48AM
    • Alan, I'm not sure the work study test condition is so much a test as you have to tick 'yes' in a box.

      Commenter
      Cat
      Date and time
      November 05, 2012, 12:48PM
    • @Colin That would mean you subsidise the middle class and not the poor. The poor are often most in need of childcare services, especially in instances where you have a single mother seeking work attending job interviews etc. I believe the cost of childcare should be charged as a proportion of joint income. Family benefits should not be based on the Mother's income if we are to overcome discrimination towards mothers in the workforce.

      Commenter
      Rachael
      Location
      Sydney
      Date and time
      November 05, 2012, 2:59PM
    • @ Rachel

      I agree the cost of childcare should be proportional to the level of joint income. However my argument is that a lot of childcare places appear to be taken up by single income families (receiving welfare) or dual welfare dependant families, and if you are receiving welfare (and not working) then your kids should be home as well not at a greatly subsidised childcare spot. I think you are deluding yourself if your think there aren't a great deal of unemployed welfare dependant mothers or fathers, single and otherwise (who don't have to work until children are school age, whatever the new law is) who see subsidised childcare and just a day off from there responsibilities ie looking after a kid. Sure these welfare dependant mothers single and otherwise may need a break but to what degree does this outweigh the need of a working mother (tax payer) for that same childcare position.

      Commenter
      Colin
      Date and time
      November 05, 2012, 3:39PM
  • The 50% is generous, but the cap is on the low side. Basically it only covers a couple of days a week given average childcare costs.

    Commenter
    JamesM
    Date and time
    November 05, 2012, 9:24AM
    • In Canberra there is a shortage of childcare. So the options are find a willing family member (unlikely) or do not go back to work (usual). This is even more expensive than rebated childcare!

      Commenter
      Outraged of Palmerston
      Date and time
      November 05, 2012, 9:53AM
      • Expensive and oppressive against the stay at home parent.

        Commenter
        Rachael
        Location
        Sydney
        Date and time
        November 05, 2012, 3:00PM

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