Finance

Budget 2015: Government to put $3.5 billion towards childcare while cutting paid parental leave “double dipping”

Cara Waters /

The government has allocated an additional $3.5 billion to reform Australia’s childcare system in this year’s budget but it will also cut paid parental leave for some parents.

“We want to give parents a choice about work, and by investing this money we are responding to the demands of 165,000 parents who want to work more, but are prevented from doing so by the current costly and complex system,” Treasurer Joe Hockey will say in his budget speech.

“Our reforms will make the system simpler, and ensure child care is more affordable, accessible and flexible.”

Child Care Safety Net

Social Services Minister Scott Morrison announced last week the government will provide an additional $327.7 million over four years through a Child Care Safety Net, which will be designed to provide financial support to disadvantages and vulnerable families.

Child Care Subsidy

The package will include a revamped Child Care Subsidy, which the government will seek to introduce from July 1, 2017.

The subsidy will be on a sliding scale that depends on a household’s combined income. For households with incomes of up to approximately $65,000, the subsidy will be 85% per child of the actual child care fee or the benchmark price, whichever is lower. This will drop to 50% for incomes of approximately $170,000 and above, while those with incomes under $185,000 will no longer have a cap on the subsidy they can receive.

Morrison said the subsidy will mean families with combined household income of up to $165,000 will be around $30 better off a week, while those with combined household income about $170,000 will receive the same average level of support.

Preschool and Nannies Trial

The government will also invest $843 million in the 2016 and 2017 calendar years for preschool programs across Australia and will spend $250 million on a Nannies Trial program to fund around 4,000 nannies.

As part of its plan, the government will abolish the current Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance programs in favour of the single, means-tested subsidy.

But the package is contingent upon the government being able to pass measures included in last year’s budget that would stop payments under the Family Tax Benefits scheme to single-income families with children under the age of six.

Paid Parental Leave

The government will also attempt to crack down on parents who “double dip” on paid leave from both their employers and the government.

The government is predicting savings of $967 million over four years by cutting access to some or all of the federal government’s existing paid parental leave scheme from July 2016 for 80,000 new parents.

The scheme currently provides $11,500 to new parents, made up of 18 weeks of leave at the minimum wage for primary care givers earning $150,000 or less a year.

However, some parents are also able to access paid parental leave from their employer, if the organisation they work for has a scheme in place.

The government wants to make sure workers cannot “double dip” by accessing both schemes.

More than 50% of new mothers are not expected to be affected by the change, while 20% will lose access to the government’s scheme and another 27% will only have partial access to the government scheme.

Peter Strong, executive director of the Council of Small Business of Australia, previously told SmartCompany he estimates less than 1% of small businesses currently offer employees paid parental leave.

“Double dipping is a big business thing,” Strong said.

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Cara Waters

Cara Waters is the former editor of SmartCompany. Previously, Cara was a senior reporter at the Financial Times website FT Adviser in London and she also worked for The Sunday Times in London.

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