Child Care Use and Cost

Many parents and caregivers across Australia utilise formal and informal child care to support labour force participation and education and training; to meet children's development needs; or to supplement care from the primary caregiver for other reasons. Recognising the increased importance of child care to support these outcomes, the Australian government subsidises child care for most households. Child care subsidies are a social transfer in kind that many parents and caregivers rely upon in order to afford the consumption of child care services.

Data on child care including usage, costs, and barriers to labour force participation due to child care related reasons were included in the Survey of Income and Housing (SIH) for the first time in 2007–08. These topics were added to the SIH to meet user requirements and provide data items examining the interactions between child care use, income and labour force participation. These data items are not intended to provide a detailed exploration of child care: this can be found in Childhood Education and Care, Australia, June 2017 and National Early Childhood Education and Care Collection: Concepts, Sources and Methods, 2013.

Child care information was collected from households containing resident children aged 0–13 years. The information was obtained from an adult who permanently resided in the household and was deemed to be the 'best person' able to provide this information. In the majority of cases this was the child's parent, step-parent or guardian.

Questions about type(s) of child care used (formal or informal), school attendance, preschool attendance and the cost of care were asked in relation to each child aged 0–13 years in the household. If formal or informal care was used by a child in the last four weeks, further questions about the cost of care, Child Care Subsidy and hours used were asked for each episode of care (that is, each type of care for each child).

Formal care is defined as regulated care away from the child's home. The main types of formal care are before and after school care, long day care, family day care, occasional care and vacation care.

Informal care is defined as non-regulated care, arranged by a child's parent or caregiver, either in the child's home or elsewhere. It comprises care by (step) brothers or sisters, care by grandparents, care by other relatives (including a parent living elsewhere) and care by other (unrelated) people such as friends, neighbours, nannies or babysitters. It may be paid or unpaid.

More than one type of care could be selected, therefore some items are multiple response in nature. An explanation of how to use these multiple responses will accompany the release of the basic and detailed microdata product to assist microdata users.

Data was collected on child care used in the four weeks prior to the personal interview, and as such most data items relate to 'last four weeks'. In addition, data is available for care types used 'in the last week' where the number of hours of care used last week was one or more. In addition to the number of hours of care used last week, parents and caregivers are asked about the number of hours of care they pay for.

Data on child care costs and subsidies output from the SIH are a combination of modelled and reported data. While child care hours and costs are output as reported, subsidies are modelled for all eligible families, and where the modelled data was higher than the reported data, the modelled data has been output. In 2013–14, the output items were revised to provide information on child care costs in a manner either fully exclusive (gross), or fully inclusive (net) of child care subsidies.

The gross cost of child care (not including the receipt of subsidies) was collected in the 2019–20 SIH. Estimates of Child Care Subsidy (CCS) is collected from the child care questions. Historically there has been a significant gap between the reported number of households receiving assistance and the total value of that assistance, compared to administrative records. In 2019–20 CCS have been modelled to improve the estimates of these payments. 

Total cost is output at three levels: Child care, Income Unit and Household, with a slight variation in the concept between the levels.

• Child care level - the total cost of care is directly the cost as reported for that care, irrespective of child care subsidies. No adjustments are made.
• Income unit level - the total cost of care is the sum of child care subsidies and out of pocket costs (includes informal care).
• Household - the total cost of care is the sum of child care subsidies and out of pocket costs (includes informal care).

The income unit is the preferred unit of analysis for child care. Resources at the income unit level are usually shared between partners in a couple relationship and with dependent children. However, there are limitations on the data provided at this level. At the income unit level, child care data are aggregated from lower levels and as such may apply to more than one child in an income unit. For example, 'Total number of hours of formal and informal child care income unit usually uses each week' is equal to the sum of all hours used by all children in the household.

The Child Care Subsidy (CCS) is the main way the Australian Government helps families with child care fees. The CCS replaced the two previous payments: Child Care Benefit and Child Care Rebate. The CCS is generally paid directly to providers who pass it on to families as a fee reduction. Families pay the difference between the provider’s fee and the subsidy amount. Families can get CCS when their child is unable to attend child care up to 42 days a year and can get extra absence days in certain circumstances.

 An individual is eligible for CCS for a session of care provided by an approved child care service to a child if, at the time the session is provided: 

• the child is Family Tax Benefit or regular care child of the individual or their partner
• the child is 13 years of age or under and does not attend secondary school
• the child meets immunisation requirements, and
• the individual, or their partner, meets the residency requirements.

The CCS is income tested and activity tested. The income test determines the rate of CCS: a percentage of either the fee charged or a set hourly fee cap, whichever is lower. The activity test determines how many hours of child care per fortnight can be subsidised by the CCS. 

The level of subsidy a family receives depends on three factors: 

•  Income – A family’s (both partners) combined income. Families earning $66,958 or less will receive a subsidy of 85 per cent of the actual fee charged (up to 85 per cent of an hourly fee cap). For family incomes above $66,958, the subsidy gradually decreases to 20 per cent when family income reaches $341,248. For families with incomes of $351,248 or more, the subsidy is zero per cent.
•  Activity test – Family entitlement to the Child Care Subsidy is determined by a three step activity test, more closely aligning the hours of subsidised care with the combined hours of work, training, study or other recognised activity undertaken, and providing for up to 100 hours of subsidy per fortnight. There are exemptions to the activity test for parents who legitimately cannot meet the activity requirements. Low income families on $66,958 or less a year who do not met the activity test are able to access 24 hours of subsidised care per fortnight without having to meet the activity test.
•  Service type – There is an hourly rate cap for each hour of child care provided which differs depending on the type of approved child care service used for example Centre based day care, outside school hours care etc. For families earning more than $186,958, an annual subsidy cap of $10,190 per child applied.

A supplementary payment was also introduced at the same time as the CCS, the Additional Child Care Subsidy (ACCS). The ACCS provides additional top up assistance in addition to the CCS for:

• children at risk of abuse or neglect
• families experiencing financial hardship
• families transitioning to work from income support
• grandparent carers on income support; and 
• some low-income families. 

Additional Subsidy is equal to 100 percent of the actual fee charged (up to 120 percent of the hourly rate cap), up to 100 hours of assistance per fortnight. The ACCS replaced a number of previous payments including Special Child Care Benefit, Grandparent Child Care Benefit and the Jobs, Education and Training Child Care Fee Assistance payment.

Estimates of Child Care Subsidy (CCS) are collected from the child care questions, however there has been a substantial gap between the reported number of households receiving child care subsidies and the total value of that assistance, compared to administrative records. CCS have been modelled to improve the accuracy of estimates of these payments. The output data is made up of both reported and modelled data. 

The Government announced an Early Childhood Education and Care Relief package which provides free child care for Australian families during the COVID-19 pandemic. The package was aimed to support services to remain open and to ensure that childhood education and care continues to be available to Australian families. From the 6th April 2020 and for the remainder of the 2019–20 financial year, any services that remained open, have children enrolled, and do not charge families fees, received a weekly payment from the Government instead of the usual Child Care Subsidy and Additional Child Care Subsidy payments. 

During April 2020 some respondents may still have reported child care costs prior to the commencement of the relief package, as the child care questions in SIH refer to the usual patterns over the last 4 weeks. For SIH responses received in May and June 2020 it is expected that families will report no costs for formal child care arrangements. This assumption is reflected in the modelling of child care data.

Due to fundamental changes between previous child care payments (e.g. the Child Care Benefit and Child Care Rebate), a significant review of the child care questions within SIH and the child care model was undertaken for the SIH 2019–20 cycle. Previously reported and modelled child care payments are not directly comparable with reported and modelled Child Care Subsidy values.