Thousands of families rushing to file their tax returns could be hit with a surprise debt instead of an expected tax offset as the federal government begins reviewing parents' incomes for the last financial year to check they received the correct amount of childcare subsidy.
The childcare sector is bracing for a flood of upset and confused parents, with about a third of the 1.1 million families who receive the childcare subsidy predicted to have been overpaid for the previous financial year.
Under the new childcare payment system, introduced in July 2018, parents estimate their annual income through myGov, and this is used to determine how much childcare subsidy they are eligible to receive. From the end of the month, the Department of Human Services will begin a "balancing" process, where it will compare parents' self-estimated income for 2018-19, with the actual income in their tax returns.
Five per cent of families' entitlements are kept back by the government during the year to try and cover any potential discrepancies, but childcare sector experts say this amount will not cover all families. One expert warned many families - who were expecting financial relief at tax time, due to the Morrison government's $1080 tax offset - were about to be "bitch-slapped".
From July 29, the Department of Human Services will begin to "balance" income estimates as soon as parents' file their tax returns. Families will then be sent a letter with one of three outcomes: their payments were accurate (and there is nothing to do), they were underpaid (and will be topped up) or they were overpaid.
If families have received more childcare subsidy than they were entitled to, funds might be recovered from future childcare subsidy payments, family tax benefit payments or tax refunds.
While balancing occurs for other government payments - such as the family tax benefit - this is the first time it has been used in a widespread manner for childcare payments.
Advocacy group The Parenthood said it was particularly concerned about parents who worked casually, or who were in a more financially vulnerable position, as they were more likely to see their incomes vary unexpectedly.
"Their hours change from week to week," spokesperson Megan O'Connell said. "Hopefully the first they hear about this issue is not receiving a debt notice via email."
Early Childhood Australia chief executive Samantha Page said she did not want to see children pulled out of early learning because families were hit with unplanned childcare expenses.
She questioned whether families properly understood the new system, and whether it was reasonable for people - who may be going back to work or adjusting their work hours to fit in with family demands - to estimate their incomes across a year.
"There is a degree of uncertainty for families that is not comfortable."
A spokesperson for the Department of Education said the childcare subsidy was the "biggest and most complex reform to childcare in Australia in more than 40 years". They said the government had already advised families to update their income information through the myGov website.
The spokesperson added that balancing was a "normal process" and that any family with a debt would have a "range of options to manage repayment".
"Similarly, families who have been underpaid could see part of their withholding returned."
Australian Childcare Alliance vice president Nesha Hutchinson urged parents to contact the Department of Human Services immediately if they got a debt letter, to work out a repayment plan.
"I really do hope this is going to be OK."
- SMH/The Age