April 12, 2018 is_admin

TAX TIME – Child Care Benefit & Child Care Rebate

Lee Nickelson is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

It’s that time of year again, time to hunt around for your MyGov username and password in order to log in and update Family Income details (see my previous Blog on how to avoid Family Tax benefit overpayments).  This year for those utilising subsidised child care, there is an additional form, to be completed PRIOR to 2 JULY 2018 – the Child Care Subsidy Assessment.

This requirement has arisen because from 2 July 2018, the Child Care Subsidy and Additional Child Care Subsidy will replace the current Child Care Benefit and Child Care Rebate.  The new payment system will pay directly to your approved child care provider to reduce the fee you pay.

You should complete a Child Care Subsidy assessment or claim before 2 July 2018 to ensure you don’t miss out on child care fee assistance from 2 July 2018. The new subsidy cannot be paid to your service on your behalf if you do not complete the assessment [1].

What will they ask?

Three things will confirm a family’s level of Child Care Subsidy.  The assessment will confirm:

  • Combined family income – A tiering system will apply to determine percentage of eligible subsidy, which fully phases out for income above $351,000
  • Activity level of parents – the parent with the lowest level of activity will determine the hours of subsidised care
  • Type of child care service – this determines the hourly rate cap [2]

Example

Judy works 3 x 8 hour days per week earning $60,000.  John works full time, and earns $80,000 giving them an adjusted taxable income of $140,000.  They have two kids aged 2 and 3, attending day care 3 days, where the centre is open 11 hours per day.  Centre based day care fees are $125 and $129 per child per day – gross fees per week $762.

Current rules mean Judy and John receive up to 50% of their child care fees back each week up to the annual cap of $7,500 per child – so for approximately 40 weeks of the year, Jim and Judy will receive $381 back per week in child care rebate.

Under the new rules, the estimate of subsidy for the above example would result in approximately $455 per week (up from $381) without an annual cap.  Judy and John will be significantly better off. [3]

Things start to change if Judy and John earn more than $251,248 – their percentage subsidy rate starts to decrease from 50%.  If they earn more than $186,958, a $10,000 subsidy cap is also applied per child. [4]

If you would like to know more, the sources below provide some great detail about the changes.

We are also here to help if you have any questions as well as help to complete the Centrelink assessment.

 

[1] https://www.education.gov.au/new-child-care-package-transition-families

[2] https://docs.education.gov.au/system/files/doc/other/the_new_child_care_package-2_0.pdf

[3] https://www.goodstart.org.au/subsidy-estimator/other

[4] https://www.education.gov.au/child-care-subsidy-combined-family-income-0

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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