One in five Canberra families accessing the childcare subsidy ended up with a debt last financial year, a higher proportion than any other jurisdiction across the country.
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Nationally almost $110 million in debts was raised against families accessing childcare for the 2018-19 financial year, $3.324 million of which was raised in the ACT.
As the federal government considers how the childcare sector will be funded as the economy reboots after the initial coronavirus response, there are calls to ensure future funding models avoid families ending up with debts.
Under the childcare funding system that was in place before the government introduced emergency coronavirus measures, rebates for childcare fees were based on a family's income and other activity tests, with families needing to estimate income in advance. It has been criticised as creating vulnerabilities for families with casual or intermittent work, and especially those on low incomes.
The average debt was $869.79 in the ACT, also above the national average of $738.23.
Almost 23,000 families in the ACT used approved childcare last year, but of the 18,578 that had completed a reconciliation with the department, 3794 accrued a debt, a rate of 20 per cent. According to information released to a Senate committee, the national rate was 13 per cent.
Across the country 117,513 families were sent a debt notice for last financial year as of February.
Chief executive of Early Childhood Australia Sam Page said the system was too complicated and needed to be simplified.
"That first year of operation has been quite illuminating in terms of some of those complexities. One of the difficulties is that the system relies on families being able to reliably predict their income, and that is not necessarily the case in the current job market," Ms Page said.
"And going forward after COVID-19, will it be reasonable to expect that people can predict their income with any accuracy?"
As the country responded to the pandemic, childcare centres were on the verge of shutting down until the government announced emergency measures, where childcare would be free for families and centres would be funded through a combination of the JobKeeper wage subsidy and a 50 per cent payment of fees.
Those measures are due to expire next month and Education Minister Dan Tehan has signalled a likely return to the childcare subsidy scheme that was introduced by the government in 2018.
Ms Page believes this is a chance to look at what elements of the scheme could be changed to provide certainty for families and children, with two guaranteed days of free childcare for each family regardless of income.
"We've called on the government to set aside the activity test because it's going to much harder for families to meet that consistently, and to increase the levels of subsidy so it's a more generous payment," she said.
"We are very worried about parents occurring childcare subsidy debt in the new economy. We're worried families might be in much more precarious employment situations - they might know know how many shifts they will get and how much they will earn."
Labor's spokeswoman for early childhood education Amanda Rishworth said the high number of families with debts showed the system was broken.
"Rather than snapping back to a flawed and confusing system that saw thousands of ACT families being lumped with debts, the Morrison government must chart a new course with early education and care," Ms Rishworth said.
"The government must properly fund and implement a system that ensures early education and care is affordable and accessible for families, rather than causing them further financial strain and stress."
Ms Rishworth said she was concerned families could be saddled with debts while still facing the uncertainty of a post-COVID world, where work is more unpredictable.
"As the government has done nothing to fix the issues with their confusing system, I fear a similar number of families will soon be lumped with another debt for this financial year," she said.
"This will be incredibly distressing for families during this difficult time, when many are already suffering from increased financial strain and reduced earning capacity."
A spokesman for the education department said no debts would be issued for the 2019-20 year until the current debt pause is lifted in October.
According to the department, 86 per cent of families either got a top up payment or had no change to their allocation.
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The balancing process was a normal part of the system, the spokesman said.
"We understand that parents' circumstances can change throughout any given year, and they are able to make changes or update their information or estimates for Child Care Subsidy at any time," the spokesman said.